Consolidated Financial Statements as of - SIF Muntenia · SIF Muntenia S.A. Consolidated Financial...

SIF Muntenia S.A.

Consolidated Financial Statements

as of 31 December 2016

Prepared in accordance with Rule no.

39/2015 approving the Accounting

Regulations compliant with International

Financial Reporting Standards, applicable to

entities authorized, regulated and supervised

by the FSA of the Investment and Financial

Instruments Sector

Table of contents

Independent auditor report

Consolidated financial statements

Consolidated statement of profit or loss and other

comprehensive income

1

Consolidated statement of financial position

3

Consolidated statement of changes in equity

5

Consolidated statement of cash flows

9

Notes to consolidated financial statements

14-91

1

Consolidated statement of profit or loss and other

comprehensive income for the financial year ended 31 December 2016

In LEI Note 2016 2015

Operating revenues 9 441,290,089 457,526,190

Other revenues and gains 10 6,567,618 7,494,026

Changes in inventories and capitalized

production 11 (5,588,227) (7,028,444)

Operating expenses 12 (344,396,496) (359,416,893)

Loss from depreciation of assets 13 (24,329,868) (22,682,295)

Other (expenses)/revenues 14 (16,055,500) 1,045,851

Operating Profit 57,487,616 76,938,435

Financing expenses (645,346) (1,285,543)

Profit before tax 56,842,270 75,652,892

Income tax 15 (11,754,016) (31,409,134)

Net Profit 45,088,254 44,243,758

Other elements of comprehensive result

Elements which are or can be transferred to

profit or loss

Net increase in the fair value of financial assets

available for sale, net of deferred tax

23,738,086 28,335,345

Decrease of reserve due to the sale of financial

assets available for sale

(13,791,497) (30,040,608)

Items that can not be reclassified to profit or

loss

Chnages of reserve from revaluation of tangible

assets

12,066,095 348,056

Total other elements of comprehensive result22,012,684 (1,357,207)

Total comprehensive result 67,100,938 42,886,551

The explanatory notes form an integral part of the consolidated financial statements.

2

Consolidated statement of profit or loss and other comprehensive

income (continued) for the financial year ended 31 December 2016


Net profit related to

Company's shareholders 37.505.301 42.381.320

Interests without control 7.582.953 1.862.438 45.088.254 44.243.758

Comprehensive result related to

Company's shareholders 57.773.903 41.990.608

Interests without control 9.327.035 895.943 67.100.938 42.886.551

Earnings per share

Basic 29 0,05 0,05

Diluted 29 0,05 0,05

The consolidated financial statements were approved by the Board of Directors on July 24, 2017

and were signed on its behalf by SAI Muntenia Invest S.A., SIF Muntenia SA

ADMINISTRATOR, PREPARED BY,

SAI MUNTENIA INVEST S.A. 3B EXPERT AUDIT S.R.L.

Florica TRANDAFIR Authorised legal person, CECCAR member

BoD President - Director Registration number with the professional body

A000158/26.01.2000

Adriana – Anişoara BADIU, Administrator

The explanatory notes form an integral part of the consolidated financial statement.

3

Consolidated statement of financial position as of 31 December 2016

In LEI Note 31 December

2016

31 December

2015

Asset

Cash and bank deposits 16 175,842,939 112,445,694

Financial assets at fair value through profit or

loss

17a 84,736,635 148,323,668

Financial assets available for sale 17b 561,882,211 523,252,066

Loans and receivables 17c 113,490,441 120,617,610

Inventories 18 38,748,708 42,293,629

Investments in associates 19 - -

Fixed assets held for sale 9,336,953 -

Real estate investments 20 205,696,019 164,657,571

Intangible assets 21 77,860,782 88,347,823

Tangible assets 22 303,398,318 330,824,481

Other assets 23 33,500,143 30,288,431

Total assets 1,604,493,149 1,561,050,973

Liabilities

Dividends and reserves distributed to be paid 24 83,804,789 131,860,658

Commercial liabilities and other liabilities 25 80,931,285 82,771,280

Loans 26 20,278,375 22,740,932

Liabilities on deffered income tax 27 49,494,934 39,512,283

Total liabilities 234,509,383 276,885,153


4

Consolidated statement of financial position (continued) as of 31 December 2016

In LEI Note 31 December

2016

31 December

2015

Equity

Company Shareholders equity

Share capital 28a 80,703,652 80,703,652

Hiperinflation effect - IAS 29 28a 803,294,017 803,294,017

Own shares 28b - -

Reserves from revaluation of financial assets

available for sale

28d 148,557,349 138,643,321

Reserves from revaluation of tangible assets 142,622,659 137,186,361

Cummulative loss 28a (11,778,664) (81,293,416)

1,163,399,013 1,078,533,935

Interests without control 206,584,753 205,631,885

Total equity 1,369,983,766 1,284,165,820

Total liabilities and equity 1,604,493,149 1,561,050,973

The consolidated financial statements were approved by the Board of Directors on July 24, 2017

and were signed on its behalf by SAI Muntenia Invest S.A., SIF Muntenia SA MANAGER, PREPARED BY,




A000158/26.01.2000



5

Consolidated statement of changes in equity for the financial year ended 31 December 2015

In LEI Share capital Own shares Reserves from

revaluation of

financial instruments

available for sale

Reserves from

revaluation of

tangible assets

Cumulative loss Total equity

attributable to

shareholders of the

Company

Interests without

control

Total

Balance as of 1 January 2015 883,997,669 (7,174) 140,174,362 141,231,543 (96,596,400) 1,068,800,000 210,883,757 1,279,683,757

Comprehensive result

Profit of the exercise 42,381,320 42,381,320 1,862,438 44,243,758


Revaluation to fair value of financial

assets available for sale, net of deferred

tax

28,509,567 28,509,567 (174,222) 28,335,345

Reserve decrease due to the sale of

financial assets available for sale

(30,040,608) (30,040,608) (30,040,608)

Surplus (loss) from revaluation of tangible

assets

1,140,329 1,140,329 (792,273) 348,056

Total other elements of comprehensive

income

- - (1,531,041) 1,140,329 - (390,712) (966,495) (1,357,207)

Total comprehensive result - - (1,531,041) 1,140,329 42,381,320 41,990,608 895,943 42,886,551

Equity attributable to Company's shareholders


6

Consolidated statement of changes in equity (continued) for the financial year ended 31 December

2015


revaluation of


available for sale

Reserves from

revaluation of

tangible assets


attributable to

shareholders of the

Company

Interests without

control

Total

Transfers

Transfer of revaluation reserves due to the

sale of tangible assets - - - (5,185,511) 5,185,511 - - -

Total transfers - - - (5,185,511) 5,185,511 - - -

Transactions with shareholders

recognized directly in equity

Purchase / sale of own shares 7,174 7,174 7,174

Dividends prescribed by law 25,666,678 25,666,678 25,666,678

Dividends declared (57,703,111) (57,703,111) (7,476,789) (65,179,900)

Reserves distributed to shareholdersAcquisition of subsidiary

Disposal of subsidiaries

Losing control of subsidiaries

Increasing participation in subsidiaries (227,414) (227,414) 1,328,974 1,101,560

Decreased shareholding in subsidiaries

without loss of controlThe contribution to capital of minority

interest in subsidiaries

Total transactions with shareholders


- 7,174 - - (32,263,847) (32,256,673) (6,147,815) (38,404,488)

Balance as of 31 December 2015 883,997,669 - 138,643,321 137,186,361 (81,293,416) 1,078,533,935 205,631,885 1,284,165,820


MANAGER, PREPARED BY,




A000158/26.01.2000



7

Consolidated statement of changes in equity (continued) for the financial year ended 31 December 2016


revaluation of


available for sale

Reserves from

revaluation of

tangible assets


attributable to

shareholders of the

Company

Interests without

control

Total

Balance as of 1 January 2016 883.997.669 - 138.643.321 137.186.361 (81.293.416) 1.078.533.935 205.631.885 1.284.165.820

Comprehensive result

Profit for the financial exercise 37.505.301 37.505.301 7.582.953 45.088.254


Revaluation to fair value of financial

assets available for sale, net of deferred

tax

23.705.525 23.705.525 32.561 23.738.086

Reserve decrease due to the sale of

financial assets available for sale

(13.791.497) (13.791.497) (13.791.497)

Surplus (loss) from revaluation of tangible

assets

10.354.574 10.354.574 1.711.521 12.066.095

Total other elements of comprehensive

result

- - 9.914.028 10.354.574 - 20.268.602 1.744.082 22.012.684

Total comprehensive result - - 9.914.028 10.354.574 37.505.301 57.773.903 9.327.035 67.100.938


8

Consolidated statement of changes in equity (continued)

for the financial year ended 31 December 2016


revaluation of


available for sale

Reserves from

revaluation of

tangible assets


attributable to

shareholders of the

Company

Interests without

control

Total

Transfers

Transfer of revaluation reserves due to the

sale of tangible assets

- - - (4,918,276) 4,918,276 - - -

Total transfers - - - (4,918,276) 4,918,276 - - -

Transactions with shareholders


Purchase / sale of own shares -

Dividends prescribed by law 63,407,818 63,407,818 63,407,818

Dividends declared (36,316,643) (36,316,643) (8,374,167) (44,690,810)

Reserves distributed to shareholders

Acquisition of subsidiary

Disposal of subsidiaries

Losing control of subsidiaries

Increasing participation in subsidiaries

Decreased shareholding in subsidiaries

without loss of control

The capital contribution of minority

interest in subsidiaries

Total transactions with shareholders


- - - - 27,091,175 27,091,175 (8,374,167) 18,717,008

Balance as of 31 December 2016 883,997,669 - 148,557,349 142,622,659 (11,778,664) 1,163,399,013 206,584,753 1,369,983,766






A000158/26.01.2000



9

Consolidated statement of cash flows for the financial year ended 31 December 2016


Operating activities

Profit before tax 56.842.270 75.652.892

Adjustments:

Dividend income 9b (46.627.576) (10.201.311)

Interest income 9b (2.410.955) (3.175.569)

Net Loss / (Net Gain) from revaluation of

financial assets at fair value through profit or

loss

9c 9.153.219 (46.490.215)

Net Loss / (Net Gain) from variation of the

exchange rate

10 977.087 (609.014)

Net Gain from the sale of tangible assets and

investment property

10 (3.114.335) (2.081.503)

Expenses related to depreciation and

impairment of property

12 30.419.801 56.746.575

Impairment losses on financial assets

available for sale

13 7.463.958 5.788.179

Impairment losses on other assets 13 16.865.910 16.894.116

Net Gain / (Net Loss) on revaluation of

investment property to fair value

14 (449.660) 4.909.360

Expenses/ (Income) for provisions for risks

and charges

14 510.726 (24.504.449)

Interest expense 645.346 1.285.543

Modification of fair value of biological assets 14 (8.144.271) (8.727.242)

Other non-cash income and expenses (7.626.030) (6.120.793)


10

Consolidated statement of cash flows (continued) for the financial year ended 31 December 2016

In LEI Notă 2016 2015

Changes in assets and liabilities related to

operating activities

Changes in financial assets at fair value

through profit or loss

(18,383,357) (69,591,922)

Changes in financial assets available for sale 42,147,977 48,091,236

Changes in bank deposits (64,591,888) (23,479,230)

Changes in loans and receivables (147,401) 1,213,929

Changes in inventories (372,482) 26,251

Changes in biological assets 3,329,952 5,352,270

Changes in trade payables and other liabilities 3,845,859 (13,103,808)

Dividends received 45,700,666 9,217,717

Interest received 2,672,405 3,699,458

Income tax paid (17,586,913) (5,377,481)

Net cash obtained from operating activities 51,120,307 15,414,989


11



Investing activities

Payments for purchases of tangible assets (32,325,456) (28,211,027)

Proceeds from sale of property and investment

property

9,242,683 4,354,132

Net cash used in investing activities (23,082,773) (23,856,895)

Financing activities

Dividends paid (26,911,963) (37,023,677)

Long-term borrowing 2,233,762 -

Repayments of long-term loans (1,121,374) (4,104,677)

Interest paid (1,083,351) (1,243,208)

Payments related to finance leases (300,043) (2,618,781)

Changing the short-term loans (1,951,946) 5,862,955

Net cash used in financing activities (29,134,914) (39,127,388)

Net decrease in cash and cash equivalents (1,097,380) (47,569,295)

Cash and cash equivalents at January 1 38,523,032 86,092,327

Cash and cash equivalents at 31 December 37,425,652 38,523,032





A000158/26.01.2000



12


Cash and cash equivalent analysis

In LEI Note 31 December 2016 31 December

2015

Cash at hand

16 209,042 217,546

Current accounts in banks 16 18,881,597 31,326,720

Bank deposits with maturity less than 3

months

16 18,335,013 6,978,766

Cash and cash equivalents 37,425,652 38,523,032


Notes to consolidated financial statements for the financial exercise ended at 31 December 2016

13

1. Reporting entity

SIF Muntenia S.A. (the "Company") is an undertaking for collective investments trust established in

1996 which operates in Romania in accordance with Law 31/1990 and Law 297/2004 on the capital

market.

The Company is headquartered in 16, Splaiul Unirii, Sector 4, Bucharest, România.

According to its statute, the main fields of activity of the Company are:

• administration and management of its own securities portfolio;

• investments in securities according to regulations in force;

• undertakings of financial resources available from natural or legal persons and their

investmenst in securities.

The company operates under a management contract concluded with Societatea de Administrare a

Investiţiilor Muntenia – Invest S.A.

The Company's shares are listed on the Bucharest Stock Exchange, Premium Category, symbol SIF

4, starting with 1 November 1999.

S.C. Depozitarul Central S.A. Bucureşti keeps evidence of shares and shareholders, according to

law.

BRD - Société Générale S.A. – Company authorised by the Financial Supervisory Authority, offers

custodian services for the Company’s assets.

The consolidated financial statements of the Company for the year ended 31 December 2016

comprise the Company and its subsidiaries (the "Group").

The core activities of the Group are represented by financial investments activity performed by the

Company and the activities of the subsidiaries consisting mainly of trade in grains and seeds,

renting of commercial premises and offices, poultry, hotel business, manufacture of fiber glass,

wholesale, production of construction materials, bakery, production and trade of drugs etc.

KPMG Audit SRL performed the audit for the consolidated financial statements for 2016 financial

exercise. The auditor has exclusively provided financial audit services. The financial auditor’s fee

for the year ended 31 December 2016 is 478,831 lei.0

2. Basis of preparation

(a) Declaration of compliance

The financial statements have been prepared in accordance with FSA Rule no.39/28 December 2015

approving the Accounting Regulations compliant with International Financial Reporting Standards,

applicable to entities authorized, regulated and supervised by the FSA, Sector of Investment and

Financial Instruments (" FSA Rule no.39/2015 ").

Consolidated financial statements as of 31 December 2016 and 31 December 2015 can be found on

the Company’s website www.sifmuntenia.ro.

http://www.sifmuntenia.ro/


14

2. Basis of preparation (continued)

(a) Declaration of compliance (continued)

31 December 2015 is for SIF Muntenia the transition date to IFRS as an accounting basis, date on

which, by restatement, operations determined by the transition from Regulation 4/2011 approved by

NSC Order No.13/2011 regarding Accounting regulations compliant with fourth Directive to the

European Economic Community to Accounting Regulations according to International Financial

Reporting Standards, were performed and accounted.

Starting with the fiscal year 2012, the Casa de Bucovina S.A. and Biofarm S.A. subsidiaries are

required to apply IFRS as an accounting basis with a single set of financial statements prepared in

accordance with IFRS.

The accounts of subsidiaries are maintained in RON in accordance with Romanian Accounting

Standards ("RAS"), except Casa de Bucovina S.A. and Biofarm S.A. subsidiaries. These accounts

have been restated to reflect differences in the accounts according to IFRS and RAS.

Correspondingly, according to RAS, accounts were adjusted, where necessary, to harmonize the

financial statements with IFRS, in all material respects, as adopted by the European Union.

Besides the specific consolidation adjustments, the main restatement of financial information

presented in financial statements prepared in accordance with Romanian Accounting Standards

consisted of:

• grouping several items into more comprehensive categories;

• adjustments to items of assets, liabilities and equity in accordance with IAS 29 "Financial

reporting in hyperinflationary economies" because the Romanian economy was a

hyperinflationary economy until 31 December 2003

• Fair value adjustments and impairment losses in accordance with IAS 39 "Financial

Instruments: Recognition and Measurement";

• adjustments to the situation of profit or loss and other comprehensive income items in order to

record the dividend income at the moment of declaration of at gross values;

• adjustment of biological assets for their evaluation at fair value less estimated point of sale in

accordance with IAS 41 "Agriculture";

• adjustments of real estate investment for their evaluation at fair value in accordance with IAS 40

"Real Estate Investment";

• adjustments to non-current assets held for sale, to assess them in accordance with IFRS 5 "Non-

current Assets Held for Sale and Discontinued Operations";

• adjustments for the recognition of assets and liabilities related to deferred income tax in

accordance with IAS 12 "Income Taxes";

• disclosure requirements under IFRS.

(b) Presentation of the financial statements

Consolidated financial statements are presented in accordance with IAS 1 "Presentation of Financial

Statements". The Group has adopted a presentation based on liquidity in the consolidated statement

of financial position and a presentation of income and expenditure according to their nature in the

consolidated statement of profit or loss and other comprehensive result, considering that these

methods of presentation provide information that is reliable and more relevant than those that would

have been presented under other methods permitted by IAS 1.


15

2. Basis of preparation (continued)

(c) Basis of evaluation

Consolidated financial statements are prepared using the fair value of derivatives, financial assets

and liabilities at fair value through profit or loss, financial assets available for sale, tangible assets

such as lands and buildings, real estate investments and biological assets and agricultural products

except those for which the fair value can not be determined reliably.

Other financial assets and liabilities and non-financial assets and liabilities are stated at amortized

cost or historical cost.

The methods used for measuring the fair value are presented in Note 4.

(d) Functional and presentation currency

The Group's management considers that the functional currency, as defined by the IAS 21 "Effects

of exchange rate variation", is the Romanian leu (RON or lei). Consolidated financial statements are

presented in RON, rounded to the nearest leu, which the Group’s management has chosen as

presentation currency.

(e) Use of estimates and judgments

Preparation of consolidated financial statements in accordance with IFRS as adopted by the

European Union involves the management’s use of estimates, judgments and assumptions that affect

the application of policies and reported amounts of assets, liabilities, income and expenses.

Judgments and assumptions associated with these estimates are based on historical experience and

on other factors deemed reasonable in light of these estimates. The results of these estimates form

the basis for judgments related to accounting values of assets and liabilities that can not be obtained

from other sources of information. The results obtained can differ from these estimates.

The judgments and assumptions underlying them are periodically reviewed. Revisions of

accounting estimates are recognized in the period in which the estimate is reviewed if the review

affects only that period or the period in which the estimate is reviewed and the future periods if the

review affects both the current period and future periods.

Judgments made by management in applying IFRS that have a significant effect on the financial

statements and estimates that involve a significant risk of a material adjustment in the next year are

disclosed in Note 4,5 and 6.


16

3. Basis of consolidation

(a) Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to

lead, directly or indirectly, financial and operating policies of an entity so as to obtain benefits from

its activities. When assessing control, one must be tak into account potential voting rights that are

exercisable or convertible at that time.

The financial statements of subsidiaries are included in the consolidated financial statements from

the moment they start to exercise control and until its termination. Group accounting policies of

subsidiaries have been changed so that to be aligned with those of the Group.

The list of investments in subsidiaries at 31 December 2016 and 31 December 2015 is presented in

Note 31.

(b) Associated entities

Associated entities are those companies in which the Group may exercise a significant influence,

but not control over financial and operating policies.

The consolidated financial statements include the Group's share of associates’ results based on the

equity method from the date on which the Group began to exercise significant influence until the

date that significant influence ceases.

Participations in which the Group holds between 20% and 50% of the voting rights but over which

it does not exercise significant influence are classified as financial assets available for sale.

Associates are accounted for using the equity method and are initially recognized at cost. Group's

investment includes goodwill identified on acquisition less any accumulated impairment losses. The

consolidated financial statements include the Group's share of income and expenses and equity

movements of associates, after adjustments to align the accounting policies with those of the Group,

since the date when significant influence begins until the significant influence ceases. When the

Group's share of losses exceeds its interest in the entity accounted for using the equity method, the

carrying amount of that interest (including any long-term investments) is reduced to zero and

recognition of further losses is discontinued unless the Group has an obligation or made payments

on behalf of the investee.

As of 31 December 2016 and 31 December 2015 no investments in associates were identified.

(c) Transactions eliminated at consolidation

Settlements and transactions within the Group, as well as unrealized gains arising from intragroup

transactions, are eliminated in the consolidated financial statements. Unrealised gains arising from

transactions with associates and jointly controlled entities are eliminated within the limits of the

Group’s participation percentage. Unrealised gains arising from transactions with an associate are

eliminated in counterpart with the investment in the associate. Unrealised losses are eliminated in

the same way as unrealized gains, but only to the extent that there are no indications of impairment.


17

4. Significant accounting policies

Significant accounting policies set out below have been applied consistently to all periods presented

in these financial statements. Accounting policies have been applied consistently to all entities of

the Group.

(a) Transactions in foreign currency

Transactions denominated in foreign currencies are recorded in lei at the official exchange rate at

the settlement date of transactions. Monetary assets and liabilities denominated in foreign currencies

at the consolidated statements date are translated into the functional currency at the exchange rate of

the day. Gains or losses resulting from the settlement thereof and the conversion using the exchange

rate at year-end of monetary assets and liabilities denominated in foreign currencies are recognized

in profit or loss except for those that were recognized in equity as a result of registration in

accordance with hedge accounting.

Translation differences on non-monetary items such as holdings at fair value through profit or loss

are presented as gains or losses from fair value. Exchange rate differences related to non monetary

financial assets, expressed in foreign currency classified as available for sale, evaluated at fair value,

are registered in a separate account of reserves.

The exchange rates of major foreign currencies were:

Currency31 December

2016

31 December

2015Variation

Euro (EUR) 1: LEU 1: LEU 4,5245 + 0,95%

US Dollar (USD) 1: LEU 1: LEU 4,1477 + 12,50%

(b) Accounting the hyperinflation effect

In accordance with IAS 29 and IAS 21, the financial statements of an entity whose functional

currency is the currency of a hyperinflationary economy should be presented in the current

measuring unit at the date of preparation of consolidated statement of financial position (non-

monetary items are restated using a general price index as of the date of purchase or contribution).

Under IAS 29, an economy is considered hyperinflationary if, among other factors, the cumulative

inflation rate over a period of three years exceeds 100%.

Continued decline in inflation and other factors related to the characteristics of the economic

environment in Romania indicate that the economy whose functional currency was adopted by the

Group ceased to be hyperinflationary with effect over financial periods starting 1 January 2004.

Therefore, provisions of IAS 29 were adopted in preparing the consolidated financial statements

until 31 December 2003.

Thus, the values expressed in the current measuring unit at 31 December 2003 are treated as the

basis for the carrying amounts in the consolidated financial statements and do not represent

appraised values, replacement cost, or any other measure of the current value of assets or the prices

at which transactions would take place at this time.


18

4. Significant accounting policies (continued)

(b) Accounting the hyperinflation effect (continued)

To the purpose of the consolidated financial statements as of 31 December 2016, the Group adjusted

the following non-cash items expressed in the current measuring unit at 31 December 2003:

• Share capital (see Note 28a);

• Financial assets available for sale for which no active market exists;

• Tangible assets acquired until 31 2003.

(c) Cash and cash equivalents

Cash and cash equivalents in the consolidated statement of financial position include: cash, current

accounts and deposits with banks (including blocked deposits and interest earned on cash deposits).

The cash flow statement has considered as cash and cash equivalents: cash, current accounts and

deposits with an original maturity of less than 3 months (excluding blocked deposits).

(d) Financial assets and liabilities

(i) Classification

The Group classifies financial instruments held in the following categories:

Financial assets and liabilities at fair value through profit or loss

This category includes financial assets or financial liabilities held for trading and financial

instruments classified at fair value through profit or loss on initial recognition. An asset or financial

liability is classified in this category if acquired principally for the speculative purpose or has been

designated in this category by the management.

Investments held to maturity

Investments held to maturity are those non-derivative financial assets with fixed or determinable

payments and fixed maturity which the Group has the positive intention and ability to hold to

maturity. Investments held to maturity are measured at amortized cost through the effective interest

method less impairment losses.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that

are not quoted in an active market, other than those that the Group intends to sell immediately or in

the near future.

Financial assets available for sale

Financial assets available for sale are those financial assets that are not classified as loans and

receivables, held to maturity or financial assets at fair value through profit or loss.


19


(d) Financial assets and liabilities (continued)

(ii) Recognition

Assets and liabilities are recognized on the date on which the Group becomes party to the

contractual terms of the respective instrument. Financial assets and liabilities are measured at initial

recognition at fair value plus transaction costs directly attributable, except for financial assets at fair

value through profit or loss and equity investments whose fair value can not be reliably determined

and they are initially recognized at cost.

(iii) Compensations

Financial assets and liabilities are offset and the net result is presented in the consolidated statement

of financial position only when there is a legal right to compensation if their intention is to settle on

a net basis, or if it is intended simultaneously the achievement of the asset and settlement of the

liabilities. Revenues and expenses are presented net only when permitted by the accounting

standards, or for the profit and loss resulted from a group of similar transactions such as the trading

activity of the Group.

(iv) Evaluation

Evaluation at amortized cost

The amortized cost of a financial asset or liability is the amount at which that asset or financial

liability is measured after initial recognition, less principal payments, plus or minus the accumulated

depreciation to date using the effective interest method, less reductions related to impairment losses.

Evaluation at fair value

Fair value is the price that would be received to sell an asset or paid to settle a liability in a

transaction carried out under normal conditions between participants on the main market at the

valuation date or if no principal market, on the most advantageous market to which the Group has

access to that date.

The Group measures the fair value of a financial instrument using quoted prices in an active market

for that instrument. A financial instrument has an active market if for that instrument quoted prices

are available quickly and regularly. The category of financial instruments quoted in an active market

includes all those instruments admitted to trading on a stock exchange and frequently presents at

least 30 transactions during the 30 trading days prior to the evaluation. The market price used to

determine fair value is the closing market price on the last trading day before the valuation date.

In the absence of price quotations in an active market, the Group uses valuation techniques based on

the analysis of discounted cash flows and other valuation methods commonly used by market

participants, making full use of market information, relying as little as possible on company-specific

information. The Group uses valuation techniques that maximize the use of observable data and

minimizes the use of unobservable inputs.

The value resulting by using a valuation model is adjusted based on a number of factors, due to the

fact that assessment techniques do not reliably reflect all the factors considered by market

participants when a transaction is performed. Adjustments are recorded to reflect the risk models,

differences between quotations for sale and purchase, liquidity risks, and other factors.


20



(iv) Evaluation (continued)

Financial assets available for sale for which no active market exists and where it is not possible to

determine reliably a fair value are evaluated at cost and periodically tested for impairment. The

Group recognizes transfers between levels at the fair value at the end of the reporting period in

which they occurred.

(v) Identification and evaluation of impairment

Financial assets measured at amortized cost

On conclusion of each consolidated statement of financial position, the Group examines whether

there is any indication that a financial asset or group of financial assets is impaired. A financial asset

or group of financial assets is impaired if and only if there is objective evidence of impairment

arising as a result of one or more events that occurred after the initial recognition of the asset ("loss

event”) and loss event or events have an impact on future cash flows of the financial asset or group

of financial assets that can be reliably estimated.

If there is objective evidence that there has been an impairment loss on financial assets held to

maturity registered at amortized cost, the loss is measured as the difference between the asset's book

value and the present value of future cash flows using the effective interest rate of the financial asset

at initial moment.

If a loan, receivable or held-to-maturity investment has a variable interest rate, the discount rate for

measuring any loss of impairment is the current variable interest rate specified in the contract. The

book value of the asset is reduced through use of an allowance account for impairment. Impairment

expense is recognized in profit or loss.

If in a time following an event occurring after the impairment reduces recognition of the impairment

loss, previously recognized impairment loss is reversed through the use of an allowance account for

impairment. Reducing impairment loss is recognized in profit or loss.


In the case of financial assets available for sale, when a decline in the fair value of a financial asset

available for sale was recognized directly in equity and there is objective evidence that the asset is

impaired, the cumulative loss that has been recognized directly in equity will resume in equity

accounts and be recognized in the profit or loss and other comprehensive income even though the

financial asset has not been derecognised.

The value of the cumulative loss that is resumed from equity items in profit or loss will be the

difference between the acquisition cost (net of principal repayments and amortization) and current

fair value, less any impairment loss on that financial asset previously recognized in profit or loss.

Impairment losses recognized in profit or loss related to certain equity instrument classified as

available for sale can not be reversed in profit or loss. If, in a subsequent period, the fair value of an

impaired equity increases, the recovery is recognized directly in other comprehensive income.


21



(v) Identification and evaluation of impairment (continued)

If there is objective evidence of an impairment loss on an unlisted participation which is not

presented at fair value as fair value can not be reliably measured, or on a derivative asset that is

linked to or to be settled by such an unquoted equity instrument, the amount of the impairment loss

is measured as the difference between the carrying amount of the financial asset and the present

value of future cash flows using current internal rate of return for a similar financial asset market.

These impairment losses are not reversed in profit or loss.

To determine whether an asset is impaired, the Group considers loss-generating relevant events,

such as significant long-term decline in fair value below cost; market conditions and industry, to the

extent that they influence the recoverable amount of the asset; financial conditions and near-term

prospects of the issuer, including any specific adverse events that may influence the operations of

the issuer, the issuer recent losses, qualified independent auditor's report on the most recent

financial statements of the issuer, etc.

Given the inherent limitations of the methodologies applied and the significant uncertainty of assets

of international and local markets, the Group estimates may be revised significantly following the

date of approval of the financial statements.

(vi) Derecogntion

Group derecognises a financial asset when the rights to receive cash flows of that financial asset

expire or when the Group has transferred the rights to receive the contractual cash flows related to

that financial asset in a transaction in which it transferred substantially all the risks and rewards of

ownership.

Any interest in transferred financial assets held by the Group or created for the Group is recognized

as a separate asset or liability.

The Group derecognises a financial liability when its contractual obligations have been completed

or when contractual obligations are canceled or expires.

The Group derecognises a financial asset when transferring between categories of the financial

assets available for sale, at the end of the reporting period, when there is no active market or where

it is not possible to determine reliably a fair value when the financial asset market it becomes active.

(vii) Reclassification of financial assets

The reclassification of a financial asset outside the category of the 'financial assets held for trading"

is allowed only in rare circumstances.

Transfer from the category "financial assets available for sale" under "assets held to maturity" (for

debt instruments) is possible if there is a change of intent and/or capacity or the period of

contamination finished. The fair value of the asset at the date of transfer becomes its new cost or

amortized cost, as applicable. If, as a result of a change in intent or capacity, it is no longer

appropriate to classify an asset as "held-to-maturity", it should be reclassified as "available for sale"

and remeasured at fair value.

The Group reclassifies financial assets only if there was a change in the business model for

managing those financial instruments. The Group estimates that such changes are rare. The changes

are determined by management as a result of changes in foreign and domestic operations that are

significant for the Group.


22



(vii) Reclassification of financial assets

The business model for managing financial assets determines whether their cash flows are recovered

by collecting the contractual cash flows, by the sale of the financial assets or both.

(e) Other financial assets and liabilities

Other financial assets and liabilities are measured at amortized cost using the effective interest

method, less any impairment losses.

(f) Assets classified as held for sale

Assets classified as held for sale are measured at the lowest value between the book value and fair

value less costs to sell.

Fixed assets and groups intented for disposal are classified as held for sale if their carrying amount

will be recovered principally through a sale transaction rather than through continuing use. This

condition is considered fulfilled only when the sale is probable and is expected to be completed in

no more than one year from the date of classification, and the assets are available for immediate sale

as they present at that moment.

The exchange of assets is considered to be a sale to the purpose of classification as held for sale

only if that exchange has economic substance.

(g) Inventory

Inventories are assets held for sale in the ordinary course of business, assets under production, to be

sold in the ordinary course of business, or assets in the form of raw materials and other supplies, to

be used in the production or provision of services.

Inventories are valued at the lowest value between the cost and net realizable value. The cost of

inventories includes all acquisition and processing costs and other costs incurred in bringing

inventories to the form and place in which they are at present. Net realizable value is the estimated

selling price that could be obtained in the ordinary course of business, less estimated costs of

completion and the estimated costs for completion of the sale. The cost of inventories that are not

normally fungible and of goods and services produced and intended for separate commands is

determined by specific identification of individual costs. For fungible inventories, the cost is

determined using formulas "first in, first out" (FIFO).

(h) Real estate investments

Real estate nvestment are properties (land, buildings or parts of a building) held by the Group for

rental purposes or for increasing their value, or both, rather than for:

- To be used in the production or supply of goods or services or for administrative purposes; or

- To be sold in the ordinary course of business.

Certain properties include a portion that is held for rental purposes or for increasing the value and

another portion that is held for the production of goods, provision of services or for administrative

purposes.


23


(h) Real estate investments (continued)

If these portions could be sold separately (or leased out separately under a finance lease contract),

they are separately accounted for. If the parties can not be sold separately, the property is treated as

investment property only if the portion used for the production of goods, provision of services or for

administrative purposes is insignificant.

(i) Recognition

Real estate investment is recognized as an asset if, and only if:

- The group is possible to generate future economic benefits associated with the asset;

- Cost of the asset can be determined reliably.

(ii) Assessment

Initial evaluation

Real estate investment is initially measured at cost, including transaction costs. The cost of a

purchased real estate investment comprises its purchase price plus any directly attributable

expenditure (for example, professional fees for legal services, property transfer taxes and other costs

of trading).

Subsequent measurement

The Group's accounting policy on subsequent evaluation of investment property is based on the fair

value model. This policy is applied uniformly to all real estate investment.

Evaluation of the fair value of real estate investment is performed by evaluators, members of the

National Association of Evaluators of Romania (ANEVAR). The fair value is based on market price

quotations adjusted, if necessary, due to differences in the nature, location or conditions of that

asset. If such information is not available, alternative valuation methods are used such as recent

price quotes less active markets or projections of the updated value of net operating income. These

assessments are reviewed regularly by the Group's management.

Gains or losses from change in fair value of real estate investments are recognized in profit or loss

in the period they occur.

The fair value of the real estate investment reflects market conditions at the date of the consolidated

statement of financial position.

(iii) Transfers

Transfers to or from real estate investments are made when, and only when, there is a change in use

of that asset. To transfer a real estate investment at fair value in tangible assets category, the default

cost of the asset in its subsequent accounting purposes will be its fair value at the date of change in

use.

(iv) Derecognition

The book value of a real estate investment is derecognized on disposal or when the investment is

permanently withdrawn from use and no future economic benefits are expected from its disposal.


24

Gains or losses arising on the disposal or sale of a real estate investment are recognized in profit or

loss when it is scrapped or sold.


(i) Biological assets and agricultural products

Biological assets are evaluated at initial recognition and as of any date of the statement of financial

position at fair value less estimated point of sale. The fair value of biological assets is based on their

current condition and location.

Point of sale costs include commissions to brokers and dealers, levies by regulatory bodies and

stock exchanges, transfer taxes and customs. Point of sale costs exclude transport and other costs

necessary to bring the assets on the market.

Gains and losses arising on initial recognition of biological assets at fair value less estimated point

of sale and the change in fair value less estimated point of sale, are included in profit or loss in the

period they occur.

Agricultural products harvested are valuated at fair value less estimated costs at point of sale at the

time of harvest.

(j) Intangible assets

Goodwill acquired in the context of business combinations is recognized as an asset at the

acquisition date and is calculated as the difference between the cost of the business combination and

the Group's share of net fair value of assets, liabilities and contingent liabilities acquired. Goodwill

is subsequently measured at cost less any accumulated impairment losses.

The other categories of intangible assets acquired by the Group are stated at cost, less accumulated

depreciation and accumulated impairment losses.

Internally developed intangible assets are recorded at capitalized cost, minus accumulated

depreciation and accumulated impairment losses.

Subsequent expenditure on intangible assets is capitalized only when it contributes to increasing the

future economic benefits arising from the use of such assets. All other costs are recognized in profit

or loss when realized.

Depreciation is recognized in profit or loss linear throughout the lifetime of the asset from the date

on which it is placed in service. Intangible assets (excluding goodwill) are amortized using the

straight-line method over the period between 1 and 3 years.

(k) Tangible assets

(i) Recognition and evaluation

Tangible assets are initially recognized as an asset at cost. The cost of an item of tangible assets,

comprises the purchase price, including non-recoverable taxes, after deducting any commercial

discounts and any costs directly attributable to bringing the asset to the location and condition

necessary for it to be used for the purpose intended by the management, such as staff costs arising

directly from the construction or acquisition of the assets, the costs of site preparation, initial

delivery and handling costs, installation and assembly costs, professional fees.

Tangible assets are classified by the Group in the following asset classes of the same nature and

with a similar use:

- Land;

- Construction;

- Equipment and other fixed assets


25


(k) Tangible assets (continued)

(i) Recognition and evaluation (continued)

Land and buildings are stated at the revalued amount, representing the fair value at the date of

revaluation less any subsequent accumulated depreciation and any accumulated impairment losses.

Revaluation of land and buildings is carried out by evaluators, members of ANEVAR. The fair

value is based on market price quotations adjusted, if necessary, due to differences in the nature,

location or conditions of that asset. If such information is not available, alternative valuation

methods are used such as recent price quotes in less active markets or projections of the updated

value of net operating income. The frequency of revaluations is dictated by market dynamics of the

markets of which the land and buildings held by the Group belongs.

The other categories of tangible assets are stated at cost, less accumulated amortization and the

impairment loss (see accounting policy Note 4 (l)).

Expenditure on maintenance and repairs of tangible assets are recorded in profit or loss when

incurred, while significant improvements to tangible assets, which increase the value or duration of

their life, or which increase their capacity to generate economic benefits are capitalized.

(ii) Depreciation

Depreciation is calculated using the straight-line method over the estimated useful life of the assets

as follows:

Constructions 20-50 years

Equipment, technical installations and

machinery

3-20 years

Means of transport 3-6 years

Furniture and other tangible assets 3-15 years

Depreciation methods, useful life durations and estimated residual values are reviewed by the

Group's management at each reporting date.

Land is not depreciated.

(iii) Sale / scrapping of tangible assets

Tangible assets that are scrapped or sold are removed from the consolidated statement of financial

position together with the corresponding accumulated depreciation. Any profit or loss resulting from

such operations are included in current profit or loss.


26


(l) Impairment of assets other than financial

The book value of the Group's assets that are not financial in nature, other than deferred tax assets,

are reviewed at each reporting date to identify the existence of indications of impairment. If such

indication exists, the recoverable amount of those assets is estimated. An impairment loss is

recognized when the carrying amount of the asset or its cash-generating unit exceeds its recoverable

amount of the asset or cash-generating unit. A cash-generating unit is the smallest identifiable group

that generates cash and which is independent from other assets and other groups of assets.

Impairment losses are recognized in profit or loss.

The recoverable amount of an asset or cash-generating unit is the greatest between its value in use

and its fair value less costs to sell the asset or units. In assessing net recovery value, future cash

flows are discounted using a pre-tax discount rate that reflects current market conditions and risks

specific to the asset.

Impairment losses recognized in prior periods are evaluated at each reporting date to determine

whether they decreased or no longer exists. The impairment loss shall be resumed if was a change in

the estimates used to determine the recoverable amount. An impairment loss is reversed only if the

asset's carrying amount does not exceed the carrying amount that would have been determined, net

of depreciation and amortization, if no impairment loss had been recognized.

(m) Investment subsidies

Investment subsidies are recognized in the consolidated statement of financial position at the

amount originally granted when there is sufficient certainty that they will be received and that the

Group will comply with the conditions imposed on granting subsidies. Group received investment

subsidies for the purchase of tangible assets. They are presented in the consolidated statement of

financial position as liabilities and are recognized in profit or loss through straight line through the

lifetimes of their related assets.

(n) Equity

Ordinary shares are recognized in equity.

(o) Provisions for risks and expenses

Provisions are recognized in the consolidated statement of financial position when the Group has a

liability related to a past event and it is likely that in the future be required consumption of

economic resources to extinguish this obligation and can make a reasonable estimate of the

obligation. To determine the provision, future cash flows are discounted using a pre-tax discount

rate that reflects current market conditions and risks specific to the liability.

(p) Revenues from sale of goods and services

Revenues from sale of goods and services are recorded net of commercial discounts, VAT and other

charges related to turnover.

Revenue from the sale of goods is recognized in profit or loss when the significant risks and rewards

of ownership of goods are transferred to the purchaser, which happens most often upon their

delivery.

Revenue from services is recognized in profit or loss depending on their stage of completion.


27


(q) Interest income

Income and expenses are recognized in profit or loss using the effective interest method. The

effective interest rate is the rate that exactly updates the expected cash receipts and payments in the

future during the expected life of the financial asset or liability (or, where appropriate, a shorter

period) to the carrying amount of the asset or financial liability.

(r) Dividend income

Dividend income is recognized in profit or loss on the date on which right to receive the income is

established. Dividends are decided by shareholders on the basis of statutory financial statements.

If dividends received in the form of shares as an alternative to cash, the dividend income is

recognized at the level of cash that would have been received in correspondence with an increasing

participation therein. The Group does not record dividend income from shares received free of

charge when they are distributed proportionally to all shareholders.

Dividend income is recorded on a gross basis including dividend tax, which is recognized as current

income tax expense.

(s) Rental income

The rental income generated by the tangible assets leased by the Group and are recognized in profit

or loss linearly throughout the contract.

(r) Employees benefits

(i) Short term benefits

Obligations with short-term benefits granted to employees are not updated and are recognized in the

statement of profit or loss and other comprehensive income as the services are provided.

Short-term employee benefits include salaries, bonuses and social security contributions. Short-term

employee benefits are recognized as an expense when services are rendered. It recognizes a

provision for the amounts expected to be paid in cash awards in the short term or schemes for staff

participation in profit, given that the Group currently has a legal or constructive obligation to pay

those amounts as a result of past services rendered by employees and if the obligation can be

estimated reliably.

(ii) Defined contribution plans

The Group makes payments on behalf of their employees to the Romanian State pension fund,

health insurance and unemployment fund, in the normal course of business.

All Group employees are members and also have a legal obligation to contribute (through social

contributions) to the Romanian State pension fund (a State defined contribution plan). All relevant

contributions are recognized in profit or loss when incurred. The Group has no further obligations.

The Group is not engaged in any independent pension scheme and consequently, has no other

obligations in this regard. The Group is not engaged in any other post retirement benefit system.

The Group has no obligation to provide further services to current or former employees.


28


(r) Employees benefits (continued)

(iii) Long-term employee benefits

The Group's net obligation in respect of services related to long-term benefits is the amount of

future benefit that employees have earned in return for services rendered by them in the current and

prior periods. The Group has no obligation to grant benefits to employees at retirement date.

(s) Borrowing costs

The Group capitalizes borrowing costs for eligible assets under the revised IAS 23 Borrowing Costs

revised.

(t) Income tax

Tax on profit for the period comprises current tax and deferred tax. Current income tax includes

income tax from dividends recognized at gross value.

Profit tax is recognized in profit or loss and other comprehensive income, or in equity if the tax is

related to capital items.

Current tax is the expected tax payable on the profit realized in the current period, using tax rates

applied on consolidated statement of financial position and all adjustments related to prior periods.

Deferred tax is determinated using the balance sheet method for temporary differences arising

between the fiscal tax base for calculating the tax for the assets and liabilities and their accounting

amount used for reporting in consolidated financial statements.

Deferred tax is not recognized for the following temporary differences: the initial recognition of

goodwill, the initial recognition of assets and liabilities arising from transactions that are not

business combinations and that affects neither the accounting profit or the tax differences arising on

investments in subsidiaries, provided that they are not resumed in the near future. Deferred tax is

calculated using tax rates expected to apply to temporary differences in their replay according to the

laws in force at the reporting date. Assets and liabilities deferred tax are offset only if a legally

enforceable right to offset debts and claims exists and if they are related to the current tax collected

by the same taxation authority on the same entity subject to taxation or for different tax authorities,

but they want to achieve settlement of claims and current tax liabilities using the net base or related

assets and liabilities will be realized simultaneously. Deferred tax asset is recognized only to the

extent that it is probable that future profits can be used to cover the tax loss. The claim is reviewed

at each financial year and is reduced to the extent that the related tax benefit is unlikely to be

realized. Additional taxes that arise from the distribution of dividends are recognized at the same

time as the obligation to pay dividends.

For the financial year ended 31 December 2016 and 31 December 2015, the income tax rate was

16%. The tax rate related to taxable dividend income for the year ended 31 December 2016 was of

5% (31 December 2015: 16%).


29


(u) Earnings per share

The Group discloses basic and diluted earnings per share for ordinary shares. Basic earnings per

share is determined by dividing profit or loss attributable to ordinary equity holders of the Group to

the weighted average number of ordinary shares outstanding over the reporting period. Diluted

earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders

and the weighted average number of ordinary shares with dilution effects arising from potential

ordinary shares.

(v) Dividends to be distributed

Dividends are treated as an appropriation of profit in the period in which they were declared and

approved by the General Meeting of Shareholders. Starting with the financial year ended 31

December 2015, the profit available for distribution of profits of the Company is is the profit of the

year recorded in the financial statements prepared in accordance with FSA Rule no.39/2015.

Dividends not collected for three years, after expiry of the prescription period are recorded directly

in equity being assimilated to contributions from shareholders, according to the General

Shareholders Meeting decision.

(w) Leasing payments

Operating leasing payments are recognized in profit or loss on a straight line basis over the lease

term. Leasing facilities received are recognized as an integral part of the total lease expense on the

lease. Expense for operating leases is recognized as a component of operating expenses.

Minimum lease payments under finance leases are divided proportionally between interest expense

and reduction of the lease liability. Lease interest expense is allocated to each period of the lease so

as to produce a constant interest rate for the remaining leasing liability. Contingent lease payments

are recognized by revising the minimum lease payments for the remaining period of the lease when

the lease adjustment is confirmed.

(x) Financial guarantees

Financial guarantees are contracts by which the Group assumes a commitment to make specific

payments to the holder of the financial guarantee for the loss which the holder suffers if a specific

borrower fails to make due payments in accordance with the terms of an instrument of debt.

Related liability to a financial guarantee is recognized initially at fair value, and it is amortized over

the life of the financial guarantee. Related liability to financial guarantees is subsequently measured

at the highest value between the amortized amount and the present value of payments (when

payment has become probable).

Details of financial guarantees issued by the Group in favor of third parties on 31 December 2016 or

31 December 2015 are presented in Note 30.


30


(y) Segment reporting

A segment is a distinct component of the Group's operational activities involved in generating

income and expenditure including revenue and expense arising from the interaction with other

components of the Group. The results of an operating segment are regularly reviewed, deciding on

what resources will be allocated to them and assessing its performance. Information on segment

operating results reported makers include both the costs directly attributable to the segment activity

and those that can be reasonably allocated to it. Costs that can not be allocated by segment are

primarily related costs and receivables management / debt on income tax. Capital expenditure of the

segment is the total costs of the acquisition of tangible and intangible assets other than goodwill.

(z) Standards and new interpretations that are not yet in force

A number of new standards, amendments to standards and interpretations are not yet effective for

the year ended 31 December 2016 and have not been applied in preparing these financial

statements:

A. Standards that have been adopted by the European Union

a).IFRS 9 Financial Instruments (effective date: annual periods beginning with 1 January

2018)

This standard replaces the provisions of IAS 39 "Financial Instruments: Recognition and

Measurement" on classification and measurement of financial assets, with the exception of aspects

relating to hedge accounting in respect of which entities may choose to apply the old provisions of

IAS 39 or to apply IFRS 9.

Financial assets will be classified using one of two valuation methods: at amortized cost and at fair

value through other comprehensive income elements and fair value through profit or loss.

A financial asset can be measured at amortized cost only if the following two conditions are met:

the assets are held in a business model whose objective is to hold assets for the purpose of collecting

contractual treasury flows and contract terms generates, at certain dates, cash flows representing

only the principal payment and interest on the principal due

Gains or losses on subsequent changes in the value of assets measured at fair value are recognized

in profit or loss except for investments in equity instruments that are not held for trading, for which

the standard allows the recognition of initial measurement at fair value with recognition of changes

subsequent value in the comprehensive result.

The pattern of loss in IAS 39 is replaced by the expected loss pattern, which means that it will no

longer be necessary for a loss event to occur before the recognition of an impairment adjustment. At

the same time, presentation requirements are substantial.

The Group considers that IFRS 9, when applied initially, will have a material impact on the

financial statements, as the classification and measurement of certain financial instruments is

expected to change. At the time these consolidated financial statements were prepared, the Group

did not finalize the impact measurement.


31


(z) Standards and new interpretations that are not yet in force (continued)

b) IFRS 15 – Revenues from contracts with customers (effective for periods beginning on or

after 1 January 2018)

The Standard issued on 28 May 2014 replaces IAS 11, IAS 18, IFRIC 13, IFRIC 15, IFRIC 18 and

SIC - 31. The Standard applies to contracts with customers other than insurance, financial

instruments, leasing. The Standard prescribes a unique model for analyzing customer contracts and

two revenue recognition approaches - at a moment in time or during the contract, depending on

when the obligation is met under the contract.

The Group does not expect the new standard, when applied for the first time, to have a significant

impact on the financial statements. Most likely, the timing of recognition and measurement of the

Group's income will not change after the adoption of IFRS 15 due to the nature of the Group's

operations and the types of income it obtains.

B. Standards that have not yet been adopted by the European Union

a) IFRS 16 –Leasing (effective for periods beginning on or after 1 January 2019)

IFRS 16 replaces IAS 17 Leases and related interpretations. The standard eliminates the current

accountancy model for tenants and instead requires companies to bring the most part of the leasing

contracts into the financial position within a single model, eliminating the distinction between

operating and financial leasing.

It is expected that the new standard will, when applied for the first time, have a material impact on

the financial statements, since it will require the Group to recognize in the statement of financial

position assets and liabilities for operating leases in which the Group is tenant.

b) Amendments to IAS 7 (effective for periods beginning on or after 1 January 2017)

Amendments to IAS 7 require the submission of additional information to allow users to measure

changes in debt in the course of financing activities. The Group does not consider that these

amendments will have a material effect on the financial statements.

c) Amendments to IAS 12 (effective for periods beginning on or after 1 January 2018)

The amendments clarify the accounting for deferred tax receivables in respect of debt securities

measured at fair value. It specifically clarifies that unrealized losses from fair value measurement

generate a deductible temporary difference.

The Group does not consider that these amendments will have a material effect on the financial

statements.

d) Amendments to IAS 40 Investment Property (effective for periods beginning on or after 1

January 2018)

The amendments reinforce the principle of transfers to or outside real estate investments in IAS 40

to specify that such a transfer should only be realized when there has been a real change in the use

of ownership - that is, an asset fulfills or ceases to meet the definition of real estate investment and

there is evidence of change in use. Only changing management's intention in managing the asset is

not sufficient for a transfer.

The Group does not expect the amendments to have a significant impact on the financial statements

as the Group transfers land or a building to or from real estate investments only when there is a real

change in use.


32

5. Significant risk management

Investment activity exposes the Group to a variety of risks associated with financial instruments

owned and financial markets in which it operates. The main risks to which the Group is exposed

are:

• market risk (price risk, interest rate risk and currency risk);

• liquidity risk;

• credit risk;

• taxation risk;

• operational risk.

General risk management strategy aims to maximize Group’s profit compared to the level of risk to

which it is exposed and minimize any potential adverse variations on the financial performance of

the Group.

The Group uses a variety of policies and procedures for the management and evaluation of the types

of risk to which it is exposed. These policies and procedures are presented in the subchapter

dedicated to each type of risk.

(a) Market risk

Market risk is the risk of a loss or the failure to achieve expected profit as a result of fluctuations in

prices, interest rates and exchange rates of currencies.

The Group is exposed to the following categories of market risk:

(i) Price risk

The Group is exposed to the risk associated with variation in the price of financial assets at fair

value through profit or loss and financial assets available for sale: 57% of the total shares with

active market held by the Group on 31 December 2016 (31 December 2015: 61%) were for

investments in companies that were part of the BET Index of the Bucharest Stock Exchange, a

market capitalization weighted index designed to reflect the trend of prices of the most liquid ten

shares traded on the Bucharest Stock Exchange.

The Board of Directors of SAI Muntenia Invest S.A. fulfills its role of monitoring the risk

management framework also by approving the limits of trading for speculative purposes on the

Romanian capital market.

Through its activity, the Group achieved an increased share and value traded shares sub-portfolio,

while reducing the weight of the sub-portfolio of unquoted shares.

A positive variation of 10% in the price of financial assets at fair value through profit or loss would

lead to an increase in profit before tax of the Group of 8,473,664 lei (31 December 2015:

14,832,367 lei), a negative variation 10 % having an equal net impact and of opposite sign.

A positive variation of 10% in prices of the financial assets available for sale would lead to an

increase in the Group's equity 48,089,127 lei (31 December 2015: 46,867,927 million lei), a

negative variation of 10% with an equal net impact and of opposite sign.


33

5. Significant risk management (continued)

(a) Market risk

The Group holds shares in companies operating in various sectors, such as:

In LEI 31 December 2016 % 31 December 2015 %

Financial, banking and insurance 336,065,818 72% 334,016,562 69%

Real estate, renting and other

services

24,029,503 5% 40,281,839 8%

Wholesale, retail, tourism and

restaurants

16,184,901 3% 18,462,394 4%

Building materials industry 12,798,283 3% 12,844,879 3%

Agriculture, livestock, fishing 500 0% 500 0%

Metallic construction and metal

products

38,109,771 8% 40,259,505 8%

Pharmaceutical and medical industry 921,896 0% 943,171 0%

Chemical and petrochemical

industry

4,082,725 1% 4,344,208 1%

Energy industry 16,989,918 4% 13,638,737 3%

Others 16,376,641 4% 17,658,745 4%

TOTAL (Note 17) 465,559,956 100% 482,450,541 100%

As can be seen from the above table, on 31 December 2016 the Group had shares mainly in

companies active in financial -banking and insurance, accounting for 72% of the total portfolio,

increasing as to a share of 69% recorded 31 December 2015.

Fund units held by the Group are exposed to price risk, them having in their turn, investments of

different degrees of risk (bank deposits, bonds, other fixed income instruments, equities, derivatives

etc.) - see note 32.

Structured products held by the Group are also exposed to price risk and in the amount of

64,226,991 lei (31 December 2015: 55,263,607 lei), through the underlying assets - see Note 17.

(ii) Interest rate risk

The Group faces interest rate risk exposure to adverse movements in interest rates. Changing market

interest rates directly affects income and expenses related to financial assets and liabilities that bear

floating interest rates, and the market value of the interest bearing fixed interest rates (for example,

the bonds).

On 31 December 2016 and 31 December 2015, most of the assets and liabilities of the Group are not

interest bearing. As a result, the Group is not significantly affected by interest rate fluctuations risk.

Cash and cash equivalents are generally invested in short-term interest rates in local banks. The

Group does not use derivative financial instruments to hedge against interest rate fluctuations.


34


(a) Market risk (continued)

(ii) Interest rate risk (continued)

The table below shows the Group's exposure to interest rate risk.

In LEI Book value Below 3 months Bwteen 3-12

months

Between 1-5

years

More than 5

years

No interst

31 December 2015

Financial assets

Cash and deposits with banks 175,842,939 157,231,680 18,402,217 - - 209,042

Financial assets at fair value through

profit or loss

84,736,635 - - - - 84,736,635

Financial assets available for sale 561,882,211 - - - - 561,882,211

Loans and receivables 113,490,441 32,391 - 2,042,671 - 111,415,379

Total active financiare 935,952,226 157,264,071 18,402,217 2,042,671 - 758,243,267

Financial liabilities

Dividend Payment 83,804,789 - - - - 83,804,789

Loans 20,278,375 17,599,522 - - - 2,678,853

Other financial liabilities * 71,344,489 70,412 214,350 477,275 - 70,582,452

Total financial liabilities 175,427,653 17,669,934 214,350 477,275 - 157,066,094

* Other financial liabilities include trade payables and other payables, less advances received from customers in advance earnings, provisions for risks and charges and investment

subsidies.


35




In LEI Book value Below 3 months Bwteen 3-12

months

Between 1-5

years

More than 5

years

No interst

31 December 2015

Financial assets

Cash and cash equivalents 112,445,694 92,780,817 19,447,331 - - 217,546

Financial instruments at fair value

through profit and loss

148,323,668

- - - -

148,323,668

Financial instruments available for sale 523,252,066 - - - -

523,252,066

Loans and receivables 120,617,610 33,551 - - 3,039,027 117,545,032

Total financial assets 904,639,038 92,814,368 19,447,331 - 3,039,027 789,338,312


Dividends to be paid 131,860,658 - - - - 131,860,658

Loans 22,740,932 16,634,476 2,899,192 - - 3,207,264

Other financial liabilities* 72,054,064 23,730 68,696 189,040 - 71,772,599

Total financial liabilities 226,655,654 16,658,206 2,967,888 189,040 - 206,840,521


subsidies.


36




Group net profit impact of a change of +/- 1.00% interest rate related to variable interest-bearing

assets and liabilities denominated in other currencies in conjunction with a change of +/- 5.00%

interest rate related to variable interest-bearing assets and liabilities denominated in lei is of - / +

624,898 lei (31 December 2014: - / + 701,378 lei).

(iii) Currency risk is the risk of loss or failure to achieve estimated profit as a result of unfavorable

exchange rate fluctuations. The Group is exposed to fluctuations in currency exchange rates, and

has formalized a policy of currency hedging. Most of the Group's financial assets and liabilities are

denominated in local currency, other currencies in which operations are performed are EUR and

USD.

Assets and liabilities denominated in LEI and foreign currencies on 31 December 2016 and 31

December 2015 are presented in the following tables.

31 December 2016 Book value LEI USD EUR

Financial assets

Cash and deposits with banks 175,842,939 172,385,387 969,155 2,488,397


profit or loss

84,736,635 84,736,635 - 43,505,591

Financial assets available for sale 561,882,211 561,882,211 - -

Loans and receivables 113,490,441 105,115,565 5,791,047 2,583,829

Total financial assets 935,952,226 924,119,798 6,760,202 48,577,817


Dividend Payment 83,804,789 83,804,789 - -

Loans 20,278,375 18,980,769 - 1,297,606

Other financial liabilities * 71,344,489 58,466,886 1,672,162 11,205,441

Total financial liabilities 175,427,653 161,252,444 1,672,162 12,503,047

* Other financial liabilities include trade payables and other payables, less advances received from customers

prepaid revenues, provisions for risks and charges and investment subsidies.


37



(iii) Currency risk (continued)

31 December 2016 Book value LEI USD EUR

Financial assets

Cash and deposits with banks 112.445.694 109.671.916 55.349 2.718.429


profit or loss

148.323.668 148.323.668 - 34.529.607

Financial assets available for sale 523.252.066 519.437.844 - 3.814.222

Loans and receivables 120.617.610 112.901.262 5.766.824 1.949.524

Total financial assets 904.639.038 890.334.690 5.822.173 43.011.782


Dividend to be payd 131.860.658 131.860.658 - -

Loans 22.740.932 19.887.571 - 2.853.361

Other financial liabilities * 72.054.064 62.748.314 3.053.487 6.252.263

Total financial liabilities 226.655.654 214.496.542 3.053.487 9.105.625


in advance earnings, provisions for risks and charges and investment subsidies.

The net impact on Group profit of +/- 15% change in the exchange rate of RON / EUR , in

conjunction with a change of +/- 15% exchange rate of RON / USD on 31 December 2016, all other

variables held constant, is of - / + 5,186,514 lei (31 December 2015: - / + 4,621,030 lei).

(b) Credit risk

Credit risk is the risk of loss or failure to achieve estimated profits due to failure of a counterparty to

fulfil its financial obligations. The Group is exposed to credit risk due to investments in bonds

issued by municipalities or companies, to current accounts and bank deposits and other receivables.


38


(b) Credit risk (continued)

As of 31 December 2016 Biofarm S.A. subsidiary received promissory notes from customers,

amounting to 23,838,995 lei (31 December 2015: 38,946,746 lei).

As of 31 December 2016 and 31 December 2015 the Group had no additional guarantees as

insurance and any other improvements in the credit rating.

The Group's maximum exposure to credit risk at 31 December 2016 and 31 December 2015 is

reflected in the following table:

In LEI 31 December 2016 31 December 2015

Current accounts 18,881,597 31,326,720

Bank deposits 156,292,949 80,481,290

Bonds 6,164,107 7,465,822

Trade receivables 144,116,827 143,761,392

Other receivables 23,498,762 21,496,369

Financial guarantees granted 33,400,016 26,390,695

Adjustment for impairment of loans and receivables (60,289,255) (52,105,973)

Impairment of financial guarantees (773,189) (739,555)

Total 321,291,814 258,076,760

The Group monitors the exposure to credit risk of balance sheet items by analyzing their age, as

reflected in the table below.


39



In LEI Receivables Bonds Treasury bonds Cash and cash

equivalents 31 December 2016

Adjusted individually

Significant risk 56.202.836 4.086.419

Gross value 56.202.836 4.086.419 - -

Adjustment for impairment of loans and receivables (56.202.836) (4.086.419)

Net value - - - -

Outstanding, unadjusted 80.755.502

Between 1 - 30 days old 13.527.450

Between 31-60 days old 1.268.339

Between 61-90 days old 4.302.047

Between91-180 days old 1.471.217

Between 181-365 days old 279.578

More than 365 days old 101.604.133 - - -

Gross value - - - -

Adjustment for impairment of loans and receivables 101.604.133 - - - Net value

Current, unadjusted 9.808.620 2.077.688 - 175.174.546

Without significant risk 9.808.620 2.077.688 - 175.174.546

Gross value - - - -

Adjustment for impairment of loans and receivables 9.808.620 2.077.688 - 175.174.546 Net value

167.615.589 6.164.107 - 175.174.546

Total gross value 111.412.753 2.077.688 - 175.174.546

Total net value 111.412.753 2.077.688

-

175.174.546


40



In LEI Receivables Bonds Treasury bonds Cash and cash

equivalents 31 December 2015

Adjusted individually

Significant risk 47,790,721 4,315,252

Gross value 47,790,721 4,315,252 - -

Adjustment for impairment of loans and receivables (47,790,721) (4,315,252)

Net value - - - -

Outstanding, unadjusted

Between 1 - 30 days old 72,805,629

Between 31-60 days old 9,168,214


Between91-180 days old 11,534,885


More than 365 days old 1,048,425

Gross value 103,625,129 - - -

Adjustment for impairment of loans and receivables - - - -

Net value 103,625,129 - - -

Current, unadjustedWithout significant risk 13,841,911 3,150,570 - 111,808,010 Gross value 13,841,911 3,150,570 - 111,808,010 Adjustment for impairment of loans and receivables - - - - Net value 13,841,911 3,150,570 - 111,808,010

Total gross value 165,257,761 7,465,822 - 111,808,010

Total net value 117,467,040 3,150,570 - 111,808,010


41


(c) Liquidity risk

Liquidity risk is the risk of loss or failure to achieve estimated profits resulting from failure to meet

payment obligations at any time in the short term, without this entailing excessive costs or losses

that may be incurred by the Group.

Group's assets and liabilities structure was analyzed on the basis of the period remained from the

date of the consolidated statement of financial position to the contractual maturity for the years

ended 31 December 2016 and 31 December 2015, thus:

In LEI Book value Below 3

months

Between 3

and 12

months

More than 1

year

Without

default

maturity

31 December 2016

Financial assets

Cash and deposits with banks 175,842,939 157,102,907 18,402,217 - 337,815

Financial assets at fair value


84,736,635 - - - 84,736,635

Financial assets available for

sale

561,882,211 - - - 561,882,211

Loans and receivables 113,490,441 111,447,770 - 2,042,671 -

Total financial assets 935,952,226 268,550,677 18,402,217 2,042,671 646,956,661


Dividend Payment 83,804,789 83,804,789 - - -

Loans 20,278,375 8,502,110 4,566,127 7,210,138 -

Other financial liabilities * 71,344,489 70,652,864 214,350 477,275 -

Total financial liabilities 175,427,653 162,959,763 4,780,477 7,687,413 -

Liquidity excess 760.524.573 105.590.914 13.621.740 (5.644.742) 646.956.661


prepaid expenses, provisions for risks and charges and investment subsidies.


42


(c) Liquidity risk (continued)

In LEI Book value Below 3

months

Between 3

and 12

months

More than 1

year

Without

default

maturity

31 December 2015

Financial assets

Cash and deposits with banks 112,445,694 92,763,086 19,447,331 - 235,277



148,323,668 - - - 148,323,668


sale

523,252,066 - - - 523,252,066

Loans and receivables 120,617,610 117,578,583 - 3,039,027 -

Total financial assets 904,639,038 210,341,669 19,447,331 3,039,027 671,811,011


Dividend Payment 131,860,658 131,860,658 - - -

Loans 22,740,932 11,347,597 7,624,352 3,768,983 -

Other financial liabilities * 72,054,064 71,796,328 68,696 189,040 -

Total financial liabilities 226,655,654 215,004,584 7,693,048 3,958,022 -

Liquidity excess 677.983.384 (4.662.915) 11.754.283 (918.995) 671.811.011


prepaid expenses, provisions for risks and charges and investment subsidies.

d) Taxation risk

Romanian tax legislation provides detailed and complex rules which have undergone several

changes in recent years. Interpretation of the text and the practical implementation of tax laws may

vary, existing the risk that certain transactions be interpreted differently by the tax authorities as

compared to the Group’s treatment.

In terms of income tax there is a risk of different interpretation by the tax authorities of the fiscal

rules applied, determined by the IFRS accounting regulations.

Romanian Government has a number of agencies authorized to conduct audits (controls) of

companies operating in Romania. These controls are similar to tax audits in other countries, and may

extend not only to tax matters but as well as to other legal and regulatory issues of interest to these

agencies. The group is likely to be subject to tax audits on the extent of issuing new tax regulations.

(f) Operational risk

Operational risk is the risk of incurring losses or failing to achieve estimated profits due to internal

factors such as inappropriate conduct of internal activities, the existence of a personal or systems


43

failure or due to external factors such as economic conditions, changes in the capital market,

technological progress. Operational risk is inherent in all Group activities.

Defined policies for operational risk management took into consideration each type of event that

can generate significant risks and ways of their manifestations, to eliminate or reduce losses of

financial or reputational nature.

(g) Equity adequacy

Management’s policy regarding capital adequacy focuses on maintaining a sound capital base in

order to support the ongoing development of the Group and fulfilling investment objectives.

The Group's equity includes share capital, different types of reserves and accumulated loss. Equity

totaled 1,369,983,766 RON as of 31 December 2016 (31 December 2015: 1,284,165,820 RON).

The Group or the Company are not subject to statutory capital adequacy requirements.

6. Significant accounting estimates and judgments

Key sources of estimation uncertainty

Determining the fair value of financial instruments

The fair value of financial instruments that are not traded in an active market is determined using

valuation techniques described in the accounting policy 4 (d) (iv). For financial instruments rarely

traded and for which there is no price transparency, fair value is less objective and is determined

using various levels of estimates related to the degree of liquidity, the concentration, uncertainty of

market factors, assumptions of price and other risks affecting that financial instrument. See also

"Valuation of financial instruments" below.

Impairment of loans and receivables

Assets carried at amortized cost are evaluated for impairment in accordance with accounting

policies described in note 4 (d) (v).

Assessment for impairment of receivables is made on an individual level and are based on

management's best estimate of the present value of cash flows expected to be received. To estimate

these flows, management makes estimates regarding certain financial situation of the counterparty.

Each depreciated asset is individually analysed. Adjustments accuracy depends on the estimate of

future cash flows for specific counterparties.


44

6. Significant accounting estimates and judgments (continued)

Significant accounting judgments on applying the Company's accounting policies include:

Valuation of financial instruments

The accounting policies on fair value measurement are presented in note 4 (d) (iv).

The Group uses the following hierarchy for fair value valuation methods:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or

liability, either directly (ie as prices) or indirectly (ie derived from prices)

• Level 3: inputs for the asset or liability that are not based on observable market data

(unobservable inputs). This category includes all instruments where the valuation technique

includes items that are not based on observable and unobservable input parameters which can

have a significant effect on the assessment instrument. This category includes instruments that

are valued based on quoted prices for similar instruments but which are subject to adjustments

based largely on unobservable data or estimates to reflect the difference between the two

instruments.

The fair value of financial assets and liabilities that are traded in active markets are based on quoted

market prices or the prices quoted by brokers. For all other financial instruments, the Group

determines fair value by using valuation techniques. Valuation techniques include net present value

and discounted cash flow models, comparison to similar instruments for which observable market

prices exist and other valuation techniques. Assumptions and data used in valuation techniques

include rates of interest without risk and reference rates, credit gaps and other premiums used in

estimating discount rates, yields on bonds and equity, exchange rates, equity price indices, volatility

and predicted correlations. The purpose of valuation techniques is to determine the fair value of

financial instruments which reflect the price at the reporting date, price would be determined by

participants under objective market conditions.

The Group uses recognized valuation models to determine the fair value of simple financial

instruments that use only observable market data and require very few estimates and analysis from

the management (eg instruments that are valued based on quoted prices for similar instruments and

for which no adjustments are needed based on unobservable data or estimates to reflect the

difference between the two instruments). Prices and observable input parameters in the model are

usually available on the market for capital instruments. Their availability reduces the need for

analysis from the management and uncertainty associated with determining fair value. The

availability of observable market prices and inputs varies depending on products and markets and is

subject to changes arising from specific events and general conditions in the financial markets.

For the shares that do not have a quoted market price in an active market, the Group uses valuation

models which are usually derived from known models of evaluation. Some or all significant data

input into these models may not be observable in the market and are derived from market prices or

estimated based on assumptions. Valuation models requiring unobservable inputs require a greater

degree of analysis and estimation by management to determine fair value. Analyze and estimate

from management affect, in particular, the selection of a suitable evaluation to determine future cash

flows of a financial instrument, to determine the probability of default by the counterparty and

payments in advance and selecting appropriate discount rates.


45


Given the inherent limitations of the methodologies applied and the significant uncertainty of assets

of international and local markets, the Group estimates may be revised significantly following the

date of approval of the financial statements.

Fair value hierarchy

The table below analyzes financial instruments carried at fair value depending on the valuation

method. Levels of fair value based on inputs in the valuation model have been defined in Note 6,

Valuation of financial instruments.

In LEI Level 1 Level 2 Level 3 Total

31 December 2016



20,509,644 - 64,226,991 84,736,635


at fair value (Note 17 b)

409,136,603 - 71,754,667 480,891,270

429,646,247 - 135,981,658 565,627,905

In LEI Nivel 1 Nivel 2 Nivel 3 Total

31 December 2015



35,029,700 - 113,293,968 148,323,668


at fair value (Note 17 b)

388,809,740 - 19,869,529 408,679,269

423,839,440 - 133,163,497 557,002,937

For the year ending 31 December 2016, the Group presented financial assets at fair value through

profit or loss on Level 3 of fair value hierarchy instruments held in structured products amounting to

64,226,991 lei (31 December 2015: 55,263,607 lei) and and only at 31 December 2015 in closed

end fund units amounting to 58,030,361 lei. Details of key assumptions used to determine fair value

are presented in Note 17 (a).

For the year ending 31 December 2015 the Group presented financial assets available for sale at fair

value in Level 3 of the fair value hierarchy closed fund units amounting to 71,754,667 lei (31

December 2014: 19,869,529 lei)

Although the Group believes its estimates of fair value as appropriate, other methods or assumptions

could result in different values of fair value.


46


Fair value hierarchy (continued)

Reconciliation of fair value valuations classified in Level 3 of the fair value hierarchy

In LEI

31 December 2014

Transfers to level 3

Transfers from level 3

Gains or losses relating to the

period included in profit or loss


period included in other

comprehensive incomeAcquisitions, participations in the

share capital

31 December 2015

Transfers to level 3

Transfers from level 3


period included in profit or loss


period included in other

comprehensive income

Acquisitions, participations in the

share capital

Sales

31 December 2016

(65,621,357)

-

71,754,667


sale at fair value

20,820,301

-

-

(1,515,868)

130,331

1,425,102

-

-

113,293,968

- 55,645,599

(950,772)

Financial assets at fair

value through profit or

loss

114,070,451

-

-

(776,483) -

19,869,529

-

66,203,757

64,226,991

(55,645,599) (3,800,026)

5,996,222

-

Details of the classification of financial assets and liabilities of the Company are presented in Note

17 (d).

The fair values of financial instruments that are not presented at fair value equal their carrying

amounts and are Level 3 values.

In the valuation model for financial assets available for sale -fund units, a positive change in fair

value of 10% leads to an increase in equity, net of tax, with 6,027,392 lei on 31 December 2016 (31

December 2015: 1,669,040 lei), a 10% adverse change having an equal net impact and of opposite

sign.

In the valuation model for financial assets at fair value through profit or loss - units and structured

products, a positive change in fair value of 10% leads to an increase in profit after tax of 5.395.067

lei at 31 December 2016 (31 December 2015: 9,516,693 lei), a 10% adverse change having an equal

net impact and of opposite sign.


47


Classification of financial assets and liabilities

Group's accounting policies provide the basis for assets and liabilities to be classified, at the initial

moment, in various accounting categories. For the classification of assets and liabilities at fair value

through profit or loss, the Group has determined to have been met one or more criteria set out in

note 4 (d) (i).

Revaluation of tangible assets and investment property

The group accounts the real estate investments at fair value, changes in fair value being recognized

in the consolidated profit or loss and other comprehensive income. Land and buildings are subject to

revaluation and changes in fair value are recognized in other comprehensive income. The group

appointed expert appraisers to determine the fair value at 31 December 2016. The evaluator used the

direct capitalization method and relative comparisons method, the principles and techniques of

assessment contained in the ANEVAR Valuation Standards.

The definition of control

According to the Group's accounting policies, control is the power to govern financial and operating

policies of an entity to obtain benefits from its activities. In assessing control, the Group takes into

consideration potential voting rights that are currently exercisable. However, the Group believes

that it has not control over an entity which meets the following conditions:

• The entity is bankrupt and the creditors' meeting are not controlled by the Group;

• The entity has negative net assets and the Group's residual interest in it is insignificant.

If an entity previously controlled by the Group, meets these criteria, date of loss of control is

deemed to be the date of commencement of bankruptcy proceedings.

7. Operating segments

The Group comprises the following main business segments:

- Financial investments

- Trade of cereals, grains and other products;

- Rental of commercial premises and offices;

- Poultry;

- Production and sale of drugs.

Other activities include hotel operations, glass fiber manufacture, wholesale, production of

construction materials, bakery etc.


48

7. Operating segments (continued)

in LEI Financial

investments

Trade of

cereals, seeds

and other

products

Lease of

commercial and

office space

Poultry Production and

marketing of

medicine

Other activities Eliminations Consolidated

2016

Income

Third party income 88.802.246 63.243.526 22.770.652 37.738.624 152.806.563 82.496.097 - 447.857.708

Income between segments 782.702 373.252 201.411 - - 16.551.130 (17.908.495) -

Total income 89.584.948 63.616.778 22.972.062 37.738.624 152.806.563 99.047.227 (17.908.495) 447.857.708

Result

Result per segment 54.326.614 (18.848.113) 950.705 403.076 23.413.865 6.174.176 (11.343.664) 55.076.660

Interest income 955.890 40.072 372.229 138 400.603 734.403 (92.381) 2.410.955

Operating profit 55.282.504 (18.808.042) 1.322.934 403.215 23.814.469 6.908.580 (11.436.046) 57.487.615

Financing expenses - (213.780) (6.124) (102.083) (536) (415.204) 92.381 (645.346)

Profit before taxes 55.282.504 (19.021.822) 1.316.810 301.132 23.813.933 6.493.376 (11.343.664) 56.842.269

Tax on profit (4.896.320) 743.409 (62.121) (61.300) (5.962.938) (1.514.745) - (11.754.015)

Net profit/ Net loss 50.386.184 (18.278.413) 1.254.689 239.832 17.850.995 4.977.785 (11.342.817) 45.088.254


49


In LEI Financial

investments

Trade of

cereals, seeds

and other

products

Lease of

commercial and

office space


marketing of

medicine

Other activities Consolidated

31 December 2016

Assets

Assets on segments 725,054,061 92,478,520 249,836,067 49,707,909 319,740,926 165,235,459 1,602,052,942

Not allocated assets - - - - - - 2,440,207

Total assets 1,604,493,149

Liabilities

Liabilities on segments 101,199,545 10,492,067 29,666,810 13,249,769 40,650,366 18,972,452 214,231,008

Not allocated liabilities - 9,560,969 - 3,307,179 - 7,410,227 20,278,375

Other liabilities 234,509,383

Other information

Equity expenses 21,608 393,444 4,759,780 4,876,021 19,782,425 4,456,764 34,290,042

Depreciation of tangible and

intangible assets

65,473 5,726,242 1,756,508 1,947,049 18,064,152 7,341,984 34,901,408

Impairment losses on property,

plant and equipment

recognized in profit or loss

- 3,190,593 (261,018) - - (7,411,183) (4,481,608)

Other non-monetary expenses /

(income)

7,500,742 (10,045,539) 3,735,444 (447,012) (3,754,925) (229,117) (3,240,407)


50


In LEI Financial

investments

Trade of

cereals, seeds

and other

products

Lease of

commercial and

office space


marketing of

medicine

Other activities Eliminations Consolidated

2015

Income

Third party income 103,350,899 74,634,355 31,825,985 38,469,440 151,650,266 65,089,271 - 465,020,216

Income between segments - 358,133 209,675 - - 12,856,015 (13,423,823) -

Total income 103,350,899 74,992,488 32,035,660 38,469,440 151,650,266 77,945,286 (13,423,823) 465,020,216

Result

Result per segment 74,554,620 (996,064) (724,746) 2,195,499 4,197,223 4,465,390 (9,966,153) 73,725,768

Interest income 1,088,718 41,289 575,858 10,002 781,308 761,455 (45,964) 3,212,666

Operating profit 75,643,338 (954,775) (148,888) 2,205,501 4,978,531 5,226,845 (10,012,117) 76,938,435

Financing expenses - (716,854) - (20,378) (519) (593,756) 45,964 (1,285,543)

Profit before taxes 75,643,338 (1,671,629) (148,888) 2,185,123 4,978,012 4,633,089 (9,966,153) 75,652,892

Tax on profit (11,787,601) (1,894,013) (1,125,956) (300,419) (4,522,980) (1,406,219) (10,371,946) (31,409,134)

Net profit 63,855,737 (3,565,642) (1,274,844) 1,884,704 455,032 3,226,871 (20,338,099) 44,243,758


51


In LEI Financial

investments

Trade of

cereals, seeds

and other

products

Lease of

commercial and

office space


marketing of

medicine

Other activities Consolidated

31 Deember 2015

Assets

Assets on segments 675,271,990 119,770,192 246,823,553 59,830,878 301,212,812 155,078,313 1,557,987,738

Investments in associates - - - - - - -

Not allocated assets - - - - - - 3,063,235 Total assets 1,561,050,973

Liabilities

Liabilities on segments 152,744,209 10,450,900 10,023,202 2,127,135 34,761,991 44,036,784 254,144,221

Not allocated liabilities - 14,452,421 - 499,485 - 7,789,026 22,740,932 Other liabilities 276,885,153

Other information

Equity expenses 2,999 1,208,846 844,810 192,739 22,459,160 3,988,278 28,696,832

Depreciation of tangible and

intangible assets

65,958 5,313,996 1,669,938 2,233,011 23,867,470 6,355,873 39,506,245

Impairment losses on property,

plant and equipment

recognized in profit or loss

- (77,191) 413,801 - 9,431,299 7,472,421 17,240,329

Other non-monetary expenses /

(income)

(2,185,980) (6,441,739) 10,826,679 836,531 (11,505,839) 14,392,147 5,921,800


52

8. Acquisition and disposal of subsidiaries

(a) Acquisition of subsidiaries

During 2016 no subsidiaries were purchased.

(b) Disposal of subsidiaries

During 2016 and 2015 the Group has not lost control of any of its subsidiaries previously

considered within the scope of consolidation.

9.Operating revenues

In LEI 2016 2015

Revenue from sale of goods and services (a) 343,700,585 343,045,647 Investment income (b) 69,364,790 32,343,439

Net gains from financial instruments (c) 28,224,714 82,137,104

Total 441,290,089 457,526,190

(a) Revenues from sale of goods and services

In LEI 2016 2015

Sale of goods 64,529,964 70,031,112

Sale of production 246,781,232 237,795,999

Services 30,710,725 32,541,638

Operating grants 1,678,664 2,676,898

Total 343,700,585 343,045,647

(i) Sale of production is mainly represented by sales of Biofarm S.A. of medicines to pharmaceutical

distributors in the amount of 148,760,627 lei (2015: 144,491,291 lei), sales of Avicola S.A. of hen eggs and

chickens worth 33,920,852 lei (2015: 31.998.899 lei) and the sales of Firos S.A. construction materials worth

30,460,714 lei (2015: 27,669,738 lei) (see Note 7).


53

9. Operating revenues (continued)

(b) Income from investments

In LEI 2016 2015

Dividend income 46,627,576 10,201,311

Rental income 19,985,038 18,839,240

Interest income on deposits and current accounts 2,162,491 2,966,271

Interest income on loans and receivables 132,672 209,298

Interest income on investments held to maturity 115,792 37,097

Income fromm re-invoicing utilities related to real estate

investments

341,221 90,222

Total 69,364,790 32,343,439

Dividend income is recorded on a gross basis. Tax rates on dividends for the financial year ended 31

December 2016 were 5% and zero (2015: 16% and zero).

The rental income is generated by leases of real estate space. These relate mainly to buildings

owned by the Group and classified on 31 December 2016 and 31 December 2015 as real estate

investment (see Note 20).

(c) Net gains related to financial instruments

In LEI 2016 2015

Net gain from sale of financial assets available for sale (i) 37.377.933 35.646.889

Net loss/(net gain) from revaluation of financial assets held for

trading - shares

122.856 49.018.625

Net loss / (net gain) from revaluation of financial assets held

for trading - structured products

(2.816.766) 2.002.000

Net loss from revaluation of financial assets designated at fair

value through profit or loss - units

(6.459.309) (4.530.410)

Total 28.224.714 82.137.104

(i) Historical cost of financial assets available for sale valuated at cost at the time of sale was

48,073,794 lei (2015: 2,449,716 lei) and the gain on sale was 17,796,846 lei (2015: 4,773,139 lei).

Historical cost of financial assets available for sale at fair value at the time of sale was 55,010,070

lei (2015: 51,619,121 lei) and the gain on sale was 7.864.631 lei (2015: 30,873,750 lei).


54

9. Operating revenues (continued)

(c) Net gains related to financial instruments

The historical cost of financial assets measured at fair value through profit or loss at the time of sale

was 57,290,108 lei (2015: 37,294,219 lei), and the gain on sale was 11,716,456 lei (2015: 503,587

lei).

10. Other revenues and gains

In LEI 2016 2015

Net gain from sale of property, plant and equipment and

investment property

3.114.335 2.081.503

Other operating income * 4.430.370 4.803.509

Net loss/ (net gain) from exchange rate (977.087) 609.014

Total 6.567.618 7.494.026

11. Changes in inventory and capitalized production

In LEI 2016 2015

Changes in inventories (6,242,970) (7,529,587)

Capitalized production 654,743 501,143

Total (5,588,227) (7,028,444)

12. Operating expenses

In LEI 2016 2015

Expenditure on raw materials and commodities (a) 159,521,661 165,502,978 Expenditure on external services (b) 85,819,647 74,051,144

Expenditure on salaries and other personnel expenses 68,635,387 63,116,196

Depreciation and amortization and impairment of property

(Note 21, 22)

30,419,801 56,746,575

Total 344,396,496 359,416,893

(a) Expenses with raw materials, materials and commodities

In LEI 2016 2015

Raw materials 108,965,856 110,548,700

Commodities 50,555,805 54,954,278

Total 159,521,661 165,502,978


55

12. Operating expenses (continued)

(b) Expenses with third parties

In LEI 2016 2015

Management fees 17,858,250 17,400,000

Transport 4,679,360 3,836,444

Other fees 2,667,756 2,876,000

Maintenance and repairs 2,991,893 2,400,796

Communications expenses 975,750 1,051,913

Protocol, advertising and publicity 28,821,953 22,133,666

Trading costs 525,486 488,295

Banking services 449,601 411,010

Custody fees 218,650 252,317

Other services 26,630,948 23,200,703

Total 85,819,647 74,051,144

13. Loss from impairment of assets

In LEI 2016 2015

Loss from impairment of financial assets available for sale

(Note 17b)

7,463,958 5,788,179

Loss from impairment of other assets *) 16,865,910 16,894,116

Total 24,329,868 22,682,295

*) The loss on impairment of other assets consists mainly of adjustments for impairment of loans

and receivables amounting to 8,183,282 lei (2015: 18,591,630 lei) (Note 17 c)) and depreciation

adjustments for depreciation of inventories amounting to 3,917,403 lei (2015: reversals of

adjustments amounting to 1,148,593 lei).

14. Other expenses / (income)

In LEI 2016 2015

Net gain / (net loss) on revaluation at fair value of investment

properties (Note 20)

(449.660) 4.909.360

Expenditure on utilities 13.637.038 13.442.354

Other taxes and fees 4.850.849 5.273.739

Rent expenses 1.795.271 1.727.258

Shareholders Representatives Committee's members

remuneration expense

1.423.017 1.421.727

Changes in fair value of biological assets (Note 23 (i)) (8.144.271) (8.727.242)

(Reversal) / losses on provisions for risks and liabilities 510.726 (24.504.449)

Other operating expenses 2.432.530 5.411.402

Total 16.055.500 (1.045.851)

(I) The reversals of risk and expense provisions made in 2015 are mainly reflected by the

repurchases of subsidiary Bucur S.A. amounting to RON 10,539,361 as a result of winning the


56

Rahova land dispute, and the reversals to the subsidiary Muntenia Medical Competences S.A.

amounting to RON 13,773,268 for the debt to BT Leasing entered in the creditors' table but not

included in the payments under the approved reorganization plan.

15. Income tax

In LEI 2016 2015

Current income tax 8,847,199 30,243,338

Income from deferred tax 2,906,817 1,165,796

Total 11,754,016 31,409,134

Reconciliation of profit before tax to income tax expense in profit or loss:

In LEI 2016 2015

Proft before taxes 56.842.270 75.652.892

Tax under statutory tax rate of 16% 9.094.763 12.104.463

Income tax effect on:

The dividends tax rates 2.010.724 1.257.329

Amounts relating to incomes 1.052.359 17.149.264

Amounts relating to expenses - (5.341.343)Deductions (3.362.832) (3.192.522)Nondeductible expenses 16.665.146 19.632.415

Non taxable income (17.143.352) (10.891.892)Other reversals of temporary differences 2.906.817 1.165.796 Sponsorship amounts within legal limits (154.937) (610.978)

Derecognized tax losses 685.327 136.602

Income tax 11.754.016 31.409.134

The variation of the current income tax is due to the fiscal tax loss registered by the Company in

2016, compared to the current profit tax amounting to RON 20,848,309 registered in 2015.

Starting with 2015 financial year, in determining taxable profit of the Company's, revenues and

expenses are taken into consderation according to IFRS accounting regulations net of non-taxable

income and deductible expenses are added according to the Fiscal Code.

When calculating the profit tax, there is also included in non taxable revenue category, along with

dividend income, the income from sale / transfer of shares and liquidation proceeds, no matter if the

legal entities where shareholdings are owned are legal Romanian or foreign entities, from states

with which Romania has concluded double taxation agreements (including outside the EU). This

income is not taxable if certain conditions are met (if on the date of sale / assignment of shares or

commencement of liquidation operation date, the minimum period of one year of uninterrupted

holding of an interest of at least 10% will expire). Given that the economic benefits associated with

financial assets available for sale that meet the conditions stipulated in the Tax Code are not taxable,

according to IAS 12, the tax basis of the assets is equal to the accounting basis and therefore were


57

resumed on expense with deferred tax liabilities previously recognized for temporary differences

arising from adjustments for impairment.

16. Cash and deposits with banks

In LEI 31 December

2016

31 December

2015

Cash in hand 209,042 217,546

Current accounts in banks 18,881,597 31,326,720

Bank deposits with original maturity less than 3 months 18,335,013 6,978,766

Bank deposits with original maturity more than 3 months and

less than one year

137,620,121 73,028,233

Blocked deposits 337,815 474,291

Claims attached 459,351 420,138

Total cash and deposits with banks 175,842,939 112,445,694

Current accounts and bank deposits, other than those blocked, are permanently available to the

Group and are not restricted.

17. Financial assets and liabilities

(a) Financial assets at fair value through profit or loss

In LEI 31 December

2016

31 December

2015

Financial assets held for trading

- shares (i)

16,242,205 11,972,863

Financial assets held for trading - structured products (ii) 64,226,991 55,263,607 AFinancial assets designated at fair value through profit or loss

- units (iii) 4,267,439 81,087,198

Total 84,736,635 148,323,668

(i) As of 31 December 2016 and 31 December 2015 financial assets at fair value through profit or

loss are represented by shares issued by companies listed on the Bucharest Stock Exchange.

On 1 December 2015 the Group reclassified from financial assets held for trading - shares in

financial assets available for sale, valuated at fair value, a number of five companies (Banca

Transilvania SA, SN Nuclearelectrica SA, SSIF Broker SA, SIF Banat-Crisana SA SIF Oltenia SA)

at a fair value of 221,490,474 lei. On 31 December 2015, their value is of 229,322,351 lei. The

amount recognized in other comprehensive income related to these instruments is of 7,831,877 lei.

At 31 December 2016, the fair value of these shares is 223,288,885 lei. The amount recognized in

other comprehensive income on these instruments is of minus 637,050 lei.


58

17. Financial assets and liabilities (continued)

(a) Financial assets at fair value through profit or loss (continued)

Banca Transilvania S.A. completed on 31 December 2015 the merger with Volksbank Romania S.A.

and the impact of this action is to be felt in the medium term and led to a change in the initial

strategy to keep this share in the medium term.

The company SNN Nuclearelectrica S.A. is part of the energy sector, which is in a phase of

modernization and expansion, that is why it was concluded to keep this share medium term.

SSIF Broker is in the process of diversifying its core business and trying to enter the insurance

market, in parallel with the issuance of new capital protected products which are a viable alternative

to bank deposits. Under these conditions, it was decided to change the initial strategy to keep this

share in the medium term.

For SIF Banat-Crisana S.A. and SIF Oltenia S.A., dividend policy and the growth expectations for

quotations increase on a medium and long term lead to a change in the initial strategy of keeping

those holdings for medium term.

(ii) During 2016, the Company invested 28 million units at a cost of 21,582,400 lei in structured

financial instruments issued by Merrill Lynch International & CO C, instruments following the

share price of SIF Moldova S.A. (SIF 2) for a period of one year. Merrill Lynch International & Co.

CV is a company specialized in issuing warrants and financial instruments as well as in the

distribution of fund units managed by Merrill Lynch International. The company operates as a

subsidiary of Merrill Lynch Holdings Inc. Cayman. Owning financial instruments presented above

do not carry voting stakes for the investor SIF Moldova S.A. The purchase of this type of

investment instrument is in pursuit of SIF Muntenia S.A. portfolio diversification.

At 31 December 2016, the Company has assessed these securities using a valuation model which

considers the closing quotation published by Bloomberg (0.779 lei / unit) and an adjustment factor

which mainly addresses market liquidity risk of the underlying asset and its effect on the quotation

of securities by their issuer.

The aforementioned adjustment factor diminished the fair value of these structured products with

1,090,600 lei related to net loss from revaluation of financial assets at fair value through profit or

loss.

During 2016, the Company invested in bonds issued by OPUS Chartered issuance SA with a

maturity of two years and an acquisition cost of 44,621,357 lei, equivalent of 10,000,080 Euro for a

total of 1,140 units. The purchase of such securities in the investment policy is part of SIF Muntenia

S.A. diversification of the investment portfolio. The titles follow the evolution price of a basket of

shares of SIF Moldova S.A. (a quota of 9.17%) and SIF Oltenia S.A. (a quota of 90.83%), giving

the holder the right to dividend, but without conferring voting rights for the investors in SIF 2 and

SIF5. OPUS Chartered issuance SA is a public limited liability registered in Luxembourg as

securitization unregulated company, the transaction dealer being represented by Morgan Stanley

International Plc.


59


(a) Financial assets at fair value through profit or loss (continued)

On 31 December 2016, the Company has assessed these securities using a valuation model which

considers the quotation closing price published by Bloomberg (87.758 Euro / certificate) and an

adjustment factor which mainly addressed the risk of market liquidity of the support asset and effect

its quotation on securities by their issuer.

Adjustment factor determined previously mentioned decrease in fair value of these instruments

2,270,568 lei on account of profit or loss.

(iii) As at 31 December 2016, the fund units issued by the open-end investment funds Bond Flexible

BCR EURO, Raiffeisen RON FLEXI, Raiffeisen EURO PLUS, Money Market BCR LEI have a

value of 4,267,439 lei.

At 31 December 2015, fund units issued by closed-end investment funds Active Dynamic, Active

Plus, Multicapital Invest, Omnitrend, Star Value, STK Emergent have a value of 58,030,361 lei as

at 31 December 2015 and fund units issued by open- end Next Star, Star Focus, Bond Flexible BCR

EURO, Raiffeisen RON FLEXI, Raiffeisen EURO PLUS have a value of 23,056,837 lei.

On 1 April 2016, the Company reclassified from financial assets designated at fair value through

profit or loss - fund units in available-for-sale financial assets valued at fair value a number of eight

funds (FDI Active Dinamic, FII Active Plus, FII Multicapital Invest, FII Omnitrend, FII Star Value,

FII STK Emergent, FDI Star Next and FDI Star Focus) at a fair value of 72,817,171 lei. At 31

December 2016 their value is 77,209,398 lei. The amount recognized in other comprehensive

income for these instruments is 4,392,227 lei.

These fund units have been reclassified in the light of circumstances that arose after the acquisition

and initial recognition by the Company. Due to low returns, fund units have not been traded over the

past 18 months (as a result of significant falls in assets in portfolio portfolios). Thus, the Company

will retain the fund units for a minimum of 3 years, period in which quotations are expected to

increase.

(b) Financial assets available for sale

In LEI 31 December

2016

31 December

2015

Shares at fair value (i) 368,326,810 355,904,881

Fund units at fair value (iii) 112,564,460 52,774,388

Total financial assets available for sale - measured at fair

value

480,891,270 408,679,269

Shares at cost (ii) 80,990,941 114,572,797

Total 561,882,211 523,252,066

(i) The fair value valuation of the shares was done by multiplying the number of shares at balance

sheet date to the closing price on the last trading day of the reporting period or by obtaining the

assessment reports carried out by independent evaluators. On 31 December 2016 and 31 December

2015 the category shares at fair value mainly includes the value of shares held in BRD - Groupe

Societe Generale, Banca Transilvania SA, SIF Banat-Crisana SA, SIF Oltenia SA.


60


(b) Financial assets available for sale (continued)

(ii) On 31 December 2016 the value of shares valued at cost of 80,990,941 lei (31 December 2015:

114,572,797 lei) is determined by their cost amounting to 279,033,726 lei (31 December 2015:

358,949,512 lei) decreased by impairment adjustments in the amount of 198,042,785 lei (31

December 2015: 244,376,914 lei). There were adjustments for impairment in 2016 financial year

amounting to 7,463,958 lei (2014: 5,938,223 lei).

(iii) On 31 December 2016 the Group holds fund units at fair value of which: to open end funds

(Certinvest Prudent, Certinvest Dinamic, Star Next, Star Focus, Napoca, Transilvania, Active

Dinamic, STK Europe, Prosper Invest, Erste Balanced, Erste Equity) amounting to 35,696,358 lei

and closed end funds (Certinvest Properties RO, BT Invest 1, BET-FI Index Invest, Multicapital

Invest, Omnihedge, STK Emergent, Fondul de Acţiuni Privat Transilvania, Omnitrend, Active Plus

and Star Value) amounting to 77,897,022 lei.

In Note 32 Fund units there are presented details on investment fund managers, their objectives and

structure of the portfolio to the latest available date.

Based on the regulations issued by the FSA, the fund units are valued based on net asset value,

calculated by the fund manager using closing quotes for financial instruments. If the group notes

that for the holdings of a fund there is not an active market, the assessment calls for public

information on fund holdings (financial statements, audit reports, portfolio structure, etc.) and the

net asset value. Based on net asset obtain a corrected NAV with adjustments deemed necessary at

the net asset value after analyzing public information mentioned above.

Provisions for impairment in value on 31 December 2016 in the amount of 1,028,920 lei (31

December 2015: 1,028,920 lei) are recognized mainly for FDI STK Europe, FII Omnihedge and FII

Certinvest Properties RO.


61



The movement of financial assets available for sale in the years ended 31 December 2016 and 31 December 2015 is presented in the table below:

În LEI Shares at fair value Shares at cost Fund units Total

1 January 2015 177,984,722 86,224,546 53,652,280 317,861,548

Net change during the period (i) (40,310,354) (677,175) 3,281,706 (37,705,823)

Transfer between categories (ii) (34,963,648) 34,963,648 - 0

Restatement (iii) 221,490,474 - - 221,490,474

(Losses) / Impairment losses - (5,938,223) 150,044 (5,788,179)

Changes in fair value 31,703,687 - (4,309,642) 27,394,045

31 December 2015 355,904,881 114,572,797 52,774,388 523,252,066

Net change during the period (i) (22,039,075) (4,027,325) (16,081,577) (42,147,977)

Transfer between categories (ii) 24,687,372 (24,687,372) - -

Reclassification (iii) - - 72,817,171 72,817,171

Impairment losses (2,596,799) (4,867,159) - (7,463,958)

Changes in fair value 12,370,431 - 3,054,478 15,424,909

31 December 2016 368,326,810 80,990,941 112,564,460 561,882,211


62



(i) Inputs of shares in 2016 represent: participation in share capital increases on already existing

companies in the portfolio, such as: Vrancart S.A., purchases of shares on a regulated market such

as: OMV Petrom S.A. and BRD Group Societe Generale S.A.

The outputs of shares in 2016 represent: sales of portfolio securities such as: Banca Transilvania

S.A. Teraplast S.A., Globalworth Real Estate Investments Limited, SIF Banat Crişana S.A., Petrotel

Lukoil S.A., deregistrations of companies such as: Restaurante Elements S.A., Muntenia Global

Finance S.A., Tubal S.A., Matizol S.A., Cercon Arieșul S.A., Energopetrol Construct S.A.;

withdrawals from companies such as: Energopetrol Com S.A., Timpuri Noi S.A., Galgros Galați

S.A., Vulturul S.A. Comarnic.

During 2016 there were no entries of fund units.

Outputs of fund units during 2016 represent repurchases such as FII STK Emergent, FDI BRD

Bonds, FDI Raiffeisen Confort, FDI Raiffeisen Confort EURO, FDI Certinvest Obligatiuni, FDI

BET-FI Index Invest

Inputs of shares during 2015 represents purchases of shares on a regulated market such as Banca

Transilvania S.A.

The outputs of shares during the year 2015 is: sales of securities in the portfolio such as: BRD

Group Societe General S.A., CNTEE Transelectrica S.A., Cemacon S.A., Banca Transilvania S.A.

Primcom S.A, canceled companies such as Romfor S.A., Foraje Sonde S.A., Ciprom S.A. Ploieşti,

Unirea SA Târgu-Jiu S.A., withdrawals from companies such as Indcom S.A., Stela S.A., Titan

Echipamente Nucleare S.A., Medimfarm S.A

Inputs of fund units during 2015 represent subscriptions such as: FDI BRD Obligațiuni, FDI

Certinvest Obligațiuni, FII BT Invest 1, FDI Napoca, FDI Transilvania, FDI Prosper, Fondul de

actiuni privat Transilvania.

Outputs of fund units during 2015 represent repurchases such as: FDI BRD Obligațiuni, FDI

Certinvest Obligațiuni, FII BT Invest 1, FDI Napoca, FDI Transilvania, Fondul de actiuni privat

Transilvania.

(ii) During the years ended as of 31 December 2016 and 31 December 2015 the market of certain

shares held by the Company became active, so it was possible to determine their fair value. Also,

the market shares of certain shares held by the Company became inactive, so fair value can no

longer be reliably determined.

(iii) On 1 April 2016, the Company reclassified from financial assets designated at fair value

through profit or loss – fund units in financial assets available-for-sale valued at fair value a number

of eight funds (FDI Active Dinamic, FII Active Plus, FII Multicapital Invest, FII Omnitrend, FII

Star Value, FII STK Emergent, FDI Star Next and FDI Star Focus) at a fair value of 72,817,171 lei.

On 1 December 2015, the Company reclassified from financial assets held for trading - shares in

financial assets available-for-sale, valued at fair value a total of six companies (Biofarm SA, Banca

Transilvania SA, SN Nuclearelectrica SA, SSIF Broker SA, SIF Banat -Crişana SA, SIF Oltenia

SA) at a value of 361,505,256 lei at 30 November 2015 (see Note 15 a) (i)).


63


(c) Loans and receivables

As of 31 December 2016 and 31 December 2015 the Group had the following loans and

receivables:

In LEI 31 December

2016

31 December

2015

Trade receivables 144,116,827 143,761,392

Corporate bonds - RON 5,032,013 6,337,867

Corporate bonds - EUR 1,132,094 1,127,955

Other receivables 23,498,762 21,496,369

Minus adjustments for impairment of loans and receivables (60,289,255) (52,105,973)

Total 113,490,441 120,617,610

Adjustments for impairment of loans and receivables as of 31 December 2016 comprise the

adjustments recorded by the Company for bonds held in the portfolio amounting to 4,086,419 lei

(31 December 2015: 4,315,252 lei) and adjustments registered by subsidiaries for customers and

sundry debtors amounting to 56,202,836 lei (31 December 2015: 47,790,721 lei).

Movement of adjustments for impairment is presented in the table below:

1 Jnauary 2015 33,514,343

Setting adjustments for impairment of loans and receivables

(Note 13)

18,591,630

31 December 2015 52,105,973

Setting adjustments for impairment of loans and receivables

(Note 13)

8,183,282

31 December 2016 60,289,255


64

17. Financial assets and liabilities (continued))

(d) Accounting classifications and fair values

The table below summarizes the carrying amounts and fair values of financial assets and liabilities of the Group as of 31 December 2016:

In LEI Tradable Designated at

fair value

Available for sale Cost or

amortized cost

Total book value Fair value

31 December 2016

Cash and deposits with banks - - - 175.842.939 175.842.939 175.842.939


profit or loss

80.469.196 4.267.439 - - 84.736.635 84.736.635

Financial assets available for sale - - 480.891.270 80.990.941 561.882.211 561.882.211 Loans and receivables - - - 113.490.441 113.490.441 113.490.441

Total financial assets 80.469.196 4.267.439 480.891.270 370.324.321 935.952.226 935.952.226

Dividend to be paid - - - (83.804.789) (83.804.789) (83.804.789)

Other financial liabilities* - - - (71.344.489) (71.344.489) (71.344.489)

Loans - - - (20.278.375) (20.278.375) (20.278.375)

Total financial liabilities - - - (175.427.653) (175.427.653) (175.427.653)


subsidies.

To estimate the fair value of financial assets and liabilities measured at cost or amortized cost, the Group used the following estimates and made the following significant

judgments: for elements such as cash and cash equivalents, other financial assets and liabilities that are issued or held for a very short-term loans as well as loans and receivables

that generally do not bear interest or bear fixed interest, the Group approximating their fair value with their cost; for loans and receivables, the Group has used valuation techniques

such as the nature of cash flows using observable market input data (as such, valuation was performed using Level 3 techniques).


65

17. Financial assets and liabilities (continued))

(d) Accounting classifications and fair values (continued)

The table below summarizes the carrying amounts and fair values of financial assets and liabilities of the Group as of 31 December 2015:

In LEI Tradable Designated at

fair value

Available for sale Cost or

amortized cost

Total book value Fair value

31 December 2015

Cash and deposits with banks - - - 112,445,694 112,445,694 112,445,694


profit or loss

67,236,470 81,087,198 - - 148,323,668 148,323,668

Financial assets available for sale - - 408,679,269 114,572,797 523,252,066 523,252,066

Loans and receivables - - - 120,617,610 120,617,610 120,617,610

Total financial assets 67,236,470 81,087,198 408,679,269 347,636,101 904,639,038 904,639,038

Dividend payment - - - (131,860,658) (131,860,658) (131,860,658)

Other financial liabilities* - - - (72,054,064) (72,054,064) (72,054,064)

Loans - - - (22,740,932) (22,740,932) (22,740,932) Total financial liabilities - - - (226,655,654) (226,655,654) (226,655,654)


subsidies.

To estimate the fair value of financial assets and liabilities measured at cost or amortized cost, the Group used the following estimates and made the following significant

judgments: for elements such as cash and cash equivalents, other financial assets and liabilities that are issued or held for a very short-term loans as well as loans and receivables

that generally do not bear interest or bear fixed interest, the Group approximating their fair value with their cost; for loans and receivables, the Group has used valuation

techniques such as the nature of cash flows using observable market input data (as such, valuation was performed using Level 3 techniques).


66

18. Inventory

In LEI 31 December

2016

31 December

2015

Goods in stock 10,306,665 13,979,132

Raw materials and packaging 19,490,220 15,799,375

Finished goods and work in progress 8,951,823 12,515,122

Total 38,748,708 42,293,629

During 2016, a depreciation of inventories amounting to 3,917,403 lei was recognized as expense.

During 2015, an appreciation of inventories in the amount of 1,148,593 lei was recognized as

income

19. Investments in associates On 31 December 2015 and 31 December 2016 the Group does not hold investments in associates

20. Real estate investments

Reconciliation of book value of the real estate investments

In LEI 31 December

2016

31 December

2015

Balance as of 1 January 164,657,571 170,227,729

Acquisitions (i) 1,209,439 -

Transfer from tangible assets (Note 22) (ii) 42,005,563 -

Transfer to tangible assets (Note 22) (1,157,364) -

Sales (1,468,850) (660,798)

Changes in fair value 449,660 (4,909,360)

Balance as of 31 December 205,696,019 164,657,571

Real estate investment include land and buildings held to be rented to third parties.

(i) Purchases of real estate investment during 2016 represent buildings and land owned by CI-CO

S.A. in the amount of 1,209,439 lei.

(ii) During the year 2016, certain land and buildings were transferred from the category of property,

plant and equipment to real estate investments, that have been leased or are held for capital increase

(Bucur SA transfer of 22,182,257 lei, Unisem SA transfer of 7,106,537 lei, Semrom Muntenia SA

transfer in amount of 7,526,197 lei, Firos SA transfer in the amount of 4,390,660 lei and Semrom

Oltenia SA transfer in the amount of 799,912 lei).

As of 31 December 2016 and 31 December 2015, the Group does not have real estate investments

acquired through financial leasing.


67

20. Real estate investments (continued)

During 2016, rental income from real estate investments amounted to 19,812,023 lei (2015:

15,699,358 lei). Direct operating expenses of real estate investments that generated rental income

during 2016 were in the amount of 768,959 lei (2015: 408,343 lei).

Measurement of fair value

On 31 December 2016 the Group's real estate investments were evaluated by external evaluators,

independent, authorized by the National Association of Certified Appraisers in Romania

("ANEVAR").

Fair value hierarchy

Based on inputs used in the valuation technique, the fair value of real estate investments was

classified in Level 3 of the fair value hierarchy.

Evaluation Techniques

The following table presents the valuation techniques used to determine fair value real estate

investments classified in Level 3 of the fair value hierarchy.

Evaluation Techniques Inputs The link between input

and fair value

measurement

The evaluation model considers

that the present value of net cash

flows to be generated by the

property takes into account the

growth rate of the lease,

unoccupied period, occupancy,

costs incentive for leasing such as

periods of free rent and other costs

that are not paid by tenants.

Expected net cash flows are

discounted using discount rates

based on risk. Among other

factors, estimating the discount

rate considers the quality of a

building and its location (first vs.

second), the quality conditions of

the tenant. It has direct

capitalization method applied in

order to estimate the value of

income producing properties, given

that, in general, such properties are

usually rented on a long term with

few changes in the level of rent.

Comparable values for

similar buildings, where

corrections were applied,

depending on the type of

property, location and

intrinsic elements.

The expected growth of the

rental market;

Unoccupied period until a

new lease;

Occupancy (average 85%);

The discount rates adjusted

for risk.

The estimated fair value

would increase (decrease) if:

The expected growth rate of

the rental market was higher

(lower);

Unoccupied period until a

new lease was shorter

(higher);

The occupancy rate was

higher (lower);

Risk-adjusted discount rate

was lower (higher).


68

21. Intangible assets

In LEI Goodwill Other

intangible

assets

Trademarks

and other

rights

Total

Cost

At 1 January 2015 9,642,107 5,327,210 90,365,139 105,334,456

Acquisitions - 709,295 - 709,295

Outputs - (429,913) - (429,913)La 31 decembrie 2015 9,642,107 5,606,592 90,365,139 105,613,838

Acquisitions - 113,316 - 113,316

Sales - (57,096) - (57,096)At 31 December 2016 9,642,107 5,662,812 90,365,139 105,670,058

Accumulated depreciation and

impairment losses

At 1 January 2015 - 3,072,038 - 3,072,038

Depreciation expense - 661,865 13,554,771 14,216,636

Outputs - (22,659) - (22,659)

Impairment losses - - - - La 31 decembrie 2015 - 3,711,244 13,554,771 17,266,015

Depreciation expense - 795,809 9,036,514 9,832,323

outputs - (57,096) - (57,096)

Impairment losses - 768,034 - 768,034 At 31 December 2016 - 5,217,991 22,591,285 27,809,276

Net book value

At 31 December 2015 9,642,107 1,895,348 76,810,368 88,347,823

At 31 December 2016 9,642,107 444,821 67,773,854 77,860,782

Goodwill acquired in a business combination with Biofarm S.A. through acquisition in stages,

amounting to 9,642,107 lei represents a payment made by SIF Muntenia S.A. in anticipation of

future economic benefits from assets that can not be individually identified and recognized

separately (Note 8 a).

The Group conducted impairment tests for cash-generating units (goodwill, trademarks and other

rights) where no impairment indicators were identified. Impairment tests were conducted by an

independent valuer using valuation models compliant to the ANEVAR - Evaluation Standards.

The goodwill impairment test required a comparison of the recoverable amount of the cash-

generating unit "Biofarm" with the carrying amount of the cash-generating unit, which will include

the goodwill acquired


69

21. Intangible assets (continued)

This test showed that the recoverable amount of the cash-generating unit "Biofarm" at 31 December

2016 was 326,556,079 lei (31 December 2015: 315,319,734 lei) and the book value in the amount

of 187,417,854 lei (31 December 2015: 210,185,608 lei). The analysis of the results shows that the

recoverable amount is higher than the net book value, as there is no impairment of goodwill.

To test depreciation of trademarks and customer list, fair value less costs to sell was estimated.

The method used by the Valuer to evaluate trademarks is the royalty method, as the credibility of

the method is high, based on royalty rates on the market for similar intangible assets. The

application of this method shows that the fair value of the trademarks at 31 December 2016 was

70,993,789 lei (31 December 2015: 69,233,931 lei), and the selling costs amounted to 1,419,876 lei

(31 December 2015: 1,384,679 lei), resulting in no trademark depreciation.

For the valuation of the client list, the method used by the valuator is the method of multi-periodic

excess economic benefits, which showed that the fair value of the customer list at 31 December

2016 was of 42,020,255 lei (31 December 2015: 53,426,618 lei). The selling costs were 840,405 lei

(31 December 2016: 1,068,532 lei), resulting in a depreciation of the customer list.


70

22. Tangible assets

In LEI Land Constructions Equipment and

other fixed assets

Tangible assets in

progress

Total

Cost or revaluated value

At 1 January 2015 117.576.811 136.087.025 191.171.094 22.546.509 467.381.439

Inputs 71.774 458.745 1.597.660 25.859.358 27.987.537

Revaluations (1.556.478) (9.947.657) - - (11.504.135)

Transfers to real estate investments - - - - - Transfers from tangible assets in

progress 179.113 2.168.181 4.421.946 (6.769.240) -

Outputs (1.269.021) (4.449.605) (4.150.451) - (9.869.077)At 31 December 2015 115.002.199 124.316.689 193.040.249 41.636.627 473.995.764

Inputs 389.485 148.170 7.443.173 26.195.899 34.176.726

Revaluations (1.434.051) 4.083.352 - - 2.649.301

Transfers to real estate investments (21.470.998) (20.726.076) - - (42.197.075)Transfers to non-current assets held

for sale (5.173.715) (4.163.238) - - (9.336.953)

Transfers from tangible assets in

progress 169.019 2.703.725 1.121.531 (3.994.275) -

Outputs (2.128.259) (2.239.974) (3.325.461) (705.348) (8.399.043)At 31 December 2016 85.353.679 104.122.648 198.279.491 63.132.903 450.888.722

The value of tangible assets in progress, amounting to 26,195,899 lei consist primarily of the investment of the subsidiary Biofarm S.A. for a new medicine

factory.


71

22. Tangible assets (continued)

In LEI Land Buildings Ecquipment and

other fixed assets

Tangible assets in

progress

Total

Accumulated depreciation and

impairment losses

At 1 January 2015 4,540,583 9,903,232 103,721,796 410,709 118,576,320

Depreciation expense 45,743 7,247,094 17,723,717 - 25,016,554

Revaluations - (1,172,776) - - (1,172,776)

Transfers to real estate investments - - - - -

Inputs in the consolidation perimeter - - - - -

Outputs - (3,980,680) (3,023,260) - (7,003,940)

Depreciation losses - 4,507,654 3,331,679 (84,208) 7,755,125 At 31 December 2015 4,586,326 16,504,524 121,753,932 326,501 143,171,283

Depreciation expense 62,516 7,509,307 17,426,994 - 24,998,817

Revaluations - (8,630,065) - - (8,630,065)

Transfers to real estate investments (68,442) (1,280,434) - - (1,348,876)

Outputs - (216,773) (2,699,541) - (2,916,314)

Depreciation losses - (4,460,054) (3,324,346) (42) (7,784,442)At 31 December 2016 4,580,400 9,426,505 133,157,039 326,459 147,490,403

Net book value

At 31 December 2015 110,415,873 107,812,165 71,286,316 41,310,126 330,824,481

At 31 December 2016 80,773,279 94,696,143 65,122,452 62,806,444 303,398,318


72

22. Tangible assets (continued)

Impairment losses recognized in profit or loss were classified in depreciation charges and

impairment of assets.

The carrying value of tangible assets mortgaged or pledged as collateral under loan agreements

entered into by Group entities or trade payables on 31 December 2016 amounts to 15,938,830 lei

(31 December 2015: 16,481,979lei).

Revaluations of land and buildings at 31 December 2016 or 31 December 2015 were carried out by

independent assessors using the following methods:

• market comparison method for land;

• income method, with an average capitalization rate of 10%, combined with the cost method, in th

case of constructions.

23. Other assets

In LEI 31 December

2016

31 December

2015

Advances to suppliers 5,534,952 8,859,401

Biological assets (i) 17,971,128 13,227,676

Receivables on deferred tax (see note 27) 2,440,207 3,063,235

Subsidies to be received 1,319,328 242,710

VAT to be recovered 3,980,317 3,213,322

Investments held to maturity 2,254,211 1,682,087

Total 33,500,143 30,288,431


73

23. Other assets (continued)

(i) The situation of biological assets at 31 December 2016 and 31 December 2015 is presented in the

tables below:

In LEI

Biological assets as of 1 January 2015 9,829,622

Increases through acquisitions 2,506,995

Reductions through sales (8,091,241)Changes in fair value of biological assets 8,750,324

Net effect births / mortality 231,976

Balance as of 31 December 2015 13,227,676

Of which: Current -

Long term 13,227,676

Biological assets as of 1 January 2016 13,227,676

Increases through acquisitions 355,977

Reductions through sales (2,708,321)Changes in fair value of biological assets 8,073,404

Net effect births / mortality (977,608)

Balance as of 31 December 2016 17,971,128

Of which: Current -

Long term 17,971,128

Biological assets of the Group at 31 December 2016 and 31 December 2015 primarily include

flocks owned by Avicola Bucharest S.A. On 31 December 2016 there were approximately 496,750

pieces (31 December 2015: 454,487). During the years 2016 and 2015, manufacturing activity was

conducted in the following areas: selection of light breeds, reproduction of light breeds, the

production of chickens for egg consumption, of chickens for meat and combined feed.

The Group is exposed to the following risks incidental to bird breeding activity:

Environmental risk

The Group operates the farming activity with environmental impact, which called for an

environmental permit. The group obtained environmental permits for secondary offices Avicola

S.A. Mihăileşti. For secondary offices Avicola S.A. in Butimanu and Codlea the Group filed

applications for the environmental permit.

Risk related to fluctuating supply and demand

The Group is exposed to price risk and volume of sales of biological assets. Where possible, this

risk is reduced by aligning the number of flocks to the existing demand.


74

24. Dividends and distributed reserves payment

In LEI 31 December

2016

31 December

2015

Dividend payment for 2011 - 25,322,711

Reserves distributed to shareholders as decided by SGOA as of

7 July 2012 -

38,085,107

Dividend payment for 2012 42,064,246 42,407,107

Dividend payment for 2013 - 70,599

Dividend payment for 2014 23,066,128 25,975,134

Dividend payment for 2015 18,674,415 -

Total payment of dividends distributed reserves 83,804,789 131,860,658

For the dividends not collected within 3 years from the date of the declaration, the General Meeting

of Shareholders approved their conversion to equity (retained earnings).

25. Trade payables and other payables

In LEI 31 December

2016

31 December

2015

Debts to suppliers 61,092,103 51,875,285

Payables to staff 2,625,952 2,459,684

Salary payables 1,715,398 1,751,178

Other taxes 963,347 4,315,749

Advances received from customers 382,653 995,258

Income in advance 1,080,151 1,604,460

Income tax 50,762 6,223,683

VAT to be paid 406,657 1,071,401

Financial leasing (a) 762,038 281,465

Provisions for risks and

expenses (b)

7,014,793 6,504,067

Investment subsidies (c) 1,109,199 1,613,431

Other liabilities 3,728,232 4,075,619

Total 80,931,285 82,771,280

of which with maturity in more than 1 year:

Financiar Leasing 477,275 189,040

Other taxes as of 31 December 2015 relate primarily to tax related to the dividend payment in the

amount of 3,554,859 lei.


75

25. Trade payables and other payables (continued)

(a) Financial Leasing

In LEI Net present value

of future

minimum

payments

Interest Future minimum

payments

Financial leasing at 31 December 2016Less than one year 284,763 22,447 307,210

Bewteen one and five years 477,275 18,934 496,209

More than five years - - - Total 762,038 41,381 803,419

In LEI Net present value

of future

minimum

payments

Interest Future minimum

payments

Financial leasing at 31 December 2015Less than one year 92,425 13,927 106,352

Bewteen one and five years 189,040 13,647 202,687

More than five years - - - Total 281,465 27,574 309,039

(b) Provisions for liabilities and expenses

At 31 December 2016 and 31 December 2015, the Group conducted an analysis to identify the need

for making provisions for various risks and expenses based on estimates to date on the costs

required to settle current obligations in future financial years. Given all the information held by the

Group, in consultation with its lawyers, the management estimates that the litigation provision is

sufficient at 31 December 2016 and 31 December 2015.


76

25. Trade payables and other payables (continued)

(b) Provisions for liabilities and expenses (continued)

In LEI 31 December

2016

31 December

2015

Provisions for other litigation (i) 2,493,975 3,044,570

Provisions for guarantees granted (ii) 773,189 739,555

Other provisions 3,747,629 2,719,942

Total 7,014,793 6,504,067

(i) The provisions for litigation mainly relate to disputes involving Group companies. On 31

December 2016, the provision for litigation amounting to 2,493,975 lei are mainly for the dispute

related to the subsidiary Semrom Muntenia S.A. representing the supply of wrong services for a

corn quantity amounting to 1,729,746 lei.

As of 31 December 2015, the provision for other litigation in the amount of 3,044,570 lei are mainly

for litigation involving CI-CO S.A. subsidiary with Piscicola Murghiol related to not using some

storage facilities amounting to 1,868,670 lei.

(ii) Provisions for granted guarantees represent risk provisions constituted by the Romanian Credit

Guarantee Fund for Private Entrepreneurs for the bailout portfolio.

(c) Investments subsidies

The structure of subsidies on investment companies is as follows:

In LEI 31 December

2016

31 December

2015

Avicola Bucureşti S.A. 1,059,714 1,524,770

Other companies 49,485 88,661

Total 1,109,199 1,613,431

Investment subsidies received by Avicola Bucuresti S.A. refer to the financing agreement concluded

in 2006 by Avicola Bucuresti S.A. with SAPARD Agency for granting non-refundable financial aid

to modernize Codlea and Mihăileşti farms. Estimated total value of the modernization is 7,024,000

lei, of which 3,512,000 lei represent the maximum financed granted amount. In 2013 Avicola

Bucuresti S.A. received non-refundable funding under EAFRD project. As of 31 December 2013

the amount financed was of 1,016,985 lei.


77

26. Loans Information on borrowings of the Group companies outstanding at 31 December 2016 are presented

in the table below:

Company Bank Currency Interest

rate

Final

maturity

Balance as of 31

December 2016

Firos Garanti Bank EUR variable 2018 1,297,605

Firos Banca Feroviara LEI variable 2018 5,414,308

Semrom Oltenia Banca Comerciala Română LEI variable 2016 4,252,488

Semrom Oltenia Banca Comerciala Română LEI variable 2018 3,551,309

Avicola Credite Europe Bank LEI variable 2017 2,489,628

Avicola Credite Europe Bank LEI variable 2017 34,627


Mindo Credit Agricole Bank LEI fix 2017 698,314

Semrom Muntenia Idea Bank LEI variable 2017 1,757,17220,278,375

Information on borrowings of the Group companies outstanding at 31 December 2015 are presented

in the table below:

Company Bank Currency Interest

rate

Final

maturity

Balance as of 31

December 2015

Firos Garanti Bank EUR variable 2016 950,145

Firos Garanti Bank EUR variable 2016 1,903,216

Firos Banca Feroviara LEI variable 2016-2020 3,768,983

Semrom Oltenia Banca Comercială Română LEI variable 2016 1,887,102

Semrom Oltenia Banca Comercială Română LEI variable 2016 5,337,602

Semrom Oltenia Banca Comercială Română LEI variable 2016-2020 3,553,564



Mindo Credit Agricole LEI variable 2016 665,220

Muntenia Medical

Competences

Moldir S.R.L. Constanţa LEIvariable

2016 501,462

Semrom Muntenia Idea Bank LEI variable 2016 3,674,15322,740,932


78

27. Receivable and payable on the deferred income tax

Deferred tax assets and liabilities on 31 December 2016 are generated by the elements detailed in

the following tables:

In LEI Temporary differences Deferred tax income

31 December 2016 Payables related to deferred tax income

(16%)

Financial assets available for sale 9,471,469 1,515,435

Loans and receivables 45,946,569 7,351,451

Inventory 5,369,481 859,117

Real estate investments - -

Tangible assets (50,146,606) (8,023,457)

Provisions 4,610,381 737,661

Total payables related to deferred tax income

(Nota 23)

15,251,294 2,440,207


31 December 2016 Payables related to deferred tax income

(16%)


loss

- -

Financial assets available for sale (103,467,569) (16,554,811)


Inventory 3,536,625 565,860

Biological assets and agricultural products (296,019) (47,363)

Real estate investments (28,201,488) (4,512,238)

Tangible assets (207,267,725) (33,162,836)

Provisions 1,452,950 232,472

Total payables related to deferred tax income (309,343,338) (49,494,934)

Net liabilities related to deffered tax income (47,054,727)


79

27. Receivable and payable on the deferred income tax (continued)

Deferred tax assets and liabilities on 31 December 2015 are generated by the elements detailed in

the following tables:


42,369 Payables related to deferred tax income

(16%)

Financial assets available for sale 6,080,294 972,848


Inventory - -

Real estate investments - -

Tangible assets (21,970,551) (3,515,289)

Provisions 1,690,755 270,521

Total payables related to deferred tax income

(Nota 23)

19,145,217 3,063,235


31 December 2015

Payables related to deferred tax income

(16%)


loss

27,803,363 4,448,538

Financial assets available for sale (75,667,781) (12,106,845)

Loans and receivables 36,284,706 5,805,553 Inventory 5,521,069 883,371 Biological assets and agricultural products (139,575) (22,332)

Real estate investments (29,613,638) (4,738,182)Tangible assets (215,213,669) (34,434,187)

Provisions 4,073,757 651,801

Total payables related to deferred tax income (246,951,768) (39,512,283)

Net liabilities related to deferred tax income (36,449,048)

Deferred tax assets not recognized

Certain deferred tax receivables have not been recognized because it is not probable that future

taxable profit will be recorded that the Group can use to get the benefits.

In 2016 deferred tax receivables amounting to 22,035,235 lei related to fiscal losses were not

recognized.

In 2015 deferred tax receivables amounting to 13,398,532 lei related to fiscal losses were not

recognized.


80

27. Receivable and payable on the deferred income tax (continued) Variation of receivables and liabilities related to deferred income tax is as follows:

In LEI 1 January 2015 Recognized in

profit or loss

Recognized in

other

comprehensive

income

31 December

2015

Recognized in

profit or loss

Recognized in

other

comprehensive

income

31 December

2016


profit or loss

4,936,095 (487,557) - 4,448,538 (4,448,538) - -

Financial assets available for sale (10,663,859) 506,396 (1,017,660) (11,175,123) 1,473,791 (5,379,169) (15,080,500)

Loans and receivables 7,654,755 3,523,490 - 11,178,245 194,725 - 11,372,970

Inventory 1,067,600 (184,230) - 883,370 541,607 - 1,424,977

Biological assets and agricultural

products

(50,473) 28,141 - (22,332) (25,031) - (47,363)

Tangible assets and investment

property

(43,180,806) (707,252) 1,200,402 (42,687,656) (691,183) (2,319,692) (45,698,531)

Provisions 4,770,694 (3,844,784) - 925,910 47,810 - 973,720

Fiscal loss - - - - - -

(35,465,994) (1,165,796) 182,742 (36,449,048) (2,906,817) (7,698,861) (47,054,727)

Receivables related to deferred

tax income (Note 23)

4,014,138 3,063,235 2,440,207

Liabilities related to deferred tax

income

(39,480,132) (39,512,283) (49,494,934)

(35,465,994) (36,449,048) (47,054,727)

Notes to consolidated financial statements for the financial exercise ended 31 December 2016

81

28. Equity and reserves

(a) Equity

Group’s shareholders structure as of 31 December 2016 and 31 December 2015 is:

2016 Number of

shareholders

Number of shares Amount (RON) Percentage (%)

Individuals 5,960,982 499,220,852 49,922,085 62%

Legal bodies 208 307,815,663 30,781,567 38%Total 5,961,190 807,036,515 80,703,652 100%

2015 Number of

shareholders

Number of shares Amount (RON) Percentage (%)

Individuals 5,967,795 496,617,238 49,661,724 62%

Legal bodies 225 310,419,277 31,041,928 38%Total 5,968,020 807,036,515 80,703,652 100%

All shares are ordinary shares, were subscribed and paid in full on 31 December 2016 and 31

December 2015. All shares have equal voting rights and a nominal value of 0.1 lei / share. The

number of shares authorized to be issued is equal to the shares issued. During the years 2016 and

2015 there were no changes in the number of issued shares.

Reconciliation of share capital in accordance with IFRS with the Articles of Incorporation is

presented in the following table:

In LEI 31 December

2016

31 December

2015

Share capital according to Establishment Deed 80,703,652 80,703,652 Hiperinflation effect - IAS 29 803,294,017 803,294,017

Restated share capital 883,997,669 883,997,669

Hyperinflation effect on shareholders' equity in the amount of 803,294,017 lei was registered by

reducing retained earnings, resulting in an accumulated loss as at 31 December 2016 of 11.778,664

lei (31 December 2015: 81,293,416 lei)

(b) Own shares

As of 31 December 2016 and 31 December 2015 Group's subsidiaries did not own shares of SIF

Muntenia.


82

28. Equity and reserves (continued)

(c) Legal reserves

According to legal requirements, the Group creates legal reserves in the amount of 5% of gross

profit recorded by the statutory up to the level of 20% of the share capital according to the Articles

of Incorporation. Legal reserves can not be distributed to shareholders. Legal reserves are presented

in the consolidated statement of changes in equity along with the accumulated loss and amount to

30,609,031 lei as of 31 December 2016 (31 December 2015: 28,314,946 lei).

(d) Reserves from revaluation of financial assets available for sale

This reserve includes cumulative net changes in the fair values of financial assets available for sale

from the date of their classification in this category and to the date they have been derecognized or

impaired.

Revaluation reserves of financial assets available for sale are recorded net of related deferred tax.

The value of deferred tax recognized directly by diminishing equity is presented in Note 27.

(e) Dividende

The company declared in 2016 dividends amounting to 36,316,643 lei for the year 2015,

respectively 0,045 lei / share. Biofarm S.A., Bucovina S.A., Voluthema Property Developer S.A.,

FRGC IFN, Gecsatherm S.A., CI-CO S.A. and Firos S.A. distributed on dividends from the net

profit of 2015 the amount of 19,593,560 lei out of which for the uncontrolled interests the amount

of 8,374,167 lei. In the year 2015, the Company declared dividends amounting to 57,703,111 lei for

the year 2014, respectively 0,0715 lei / share. Biofarm SA, Casa de Bucovina S.A. and Firos S.A.

distributed on dividends from the net profit of the year 2014 the amount of 15,432,870 lei out of

which the amount of 7,476,789 lei related to uncontrolled interests.

During 2016, the Group prescribed dividends amounting to 63,407,818 lei for 2011 and reserves

distributed to shareholders, according to the SGOM decision of 7 July 2012 (2015: 25,666,678 lei

for 2010).

29. Earnings per share

The calculation of basic earnings per share was carried out based on the profit attributable to

ordinary shareholders and the weighted average number of ordinary shares:

In LEI 31 December

2016

31 December

2015

Profit attributable to ordinary shareholders 37,505,301 42,381,320

Weighted average number of ordinary shares 807,036,515 807,036,515

Basic earnings per share 0.05 0.05

Diluted earnings per share equals basic earnings per share, as the Group does not record potential

ordinary shares.


83

30. Commitments and contingent liabilities

(a) Litigation

The Group is subject to a number of lawsuits arising in the normal course of business. The Group's

management believes, based on consultations with his lawyers, that these actions will not have

significant adverse effects on economic performance and financial position of the Group.

(b) Contingencies related to environment

Environmental regulations are under development in Romania and the Group did not record any

obligations at 31 December 2016 and 31 December 2015 for any anticipated costs, including legal

fees and consulting studies of site design and implementation of remedial plans concerning

environmental elements. The Group's management does not consider the costs associated with any

environmental problems as significantive.

(c) Transfer pricing

Romanian tax legislation includes the principle of "market value", according to which transactions

between affiliated parties must be carried out at market value, respecting the principles of transfer

pricing. Local taxpayers conducting transactions with affiliated parties must prepare and make

available to the tax authorities in Romania, at their written request, the dossier for transfer pricing

documentation within the timeframe granted by the authorities (large taxpayers who carry out

transactions with affiliated persons above the limits established by the legislation are subject to the

annual compilation of the transfer pricing file starting with the transactions of the year 2016).

Failure to submit a transfer pricing documentation or submitting an incomplete file may result in

penalties for non-compliance.

However, irrespective of the existence of the file, in addition to the content of the transfer pricing

documentation, tax authorities may interpret transactions and circumstances different from

management's interpretation and may therefore impose additional tax liabilities resulting from the

adjustment of transfer prices (materialized in revenue increases, deductible expenses reductions,

thereby increasing the taxable income tax base).

The current context is one in which tax authorities focus on making adjustments in terms of transfer

pricing, these adjustments many times being significant, even if the transactions were documented.

The Group believes that it will not suffer any losses in case of a fiscal check to verify transfer

pricing. However, the impact of different interpretations of tax authorities can not be estimated

reliably. This may be significant for the Group's financial position and / or operations.

(d) Contingencies related to guarantees

Guarantee contracts concluded by the Group bears a credit risk off balance sheet. Many of these

commitments mature without generating liabilities of the Group. Off-balance sheet exposures do not

represent future cash flows. In parallel, partner banks register for loans collaterals represented by

mortgages, pledges without dispossession of securities and collaterals given by other guarantee

funds.

If the loss event occurs and the guarantee is paid, the Group is part of the list of creditors to recover

amounts from the borrowers to the extent that they exceed the claim filed by the partner bank. The

balance of guarantees granted on 31 December 2016 is 33,400,016 lei (31 December 2015:

26,390,695 lei). Specific provisions are recorded for the risks identified in relation to balance sheet

items such as guarantees for loans granted by partner banks.

As of 31 December 2016, the subsidiary Biofarm S.A. did not have an ownership title over the land

in use in Logofăt Tăutu Str. This land is not included in the financial statements because the title

deeds have not yet been obtained, notifications under Law no.10 / 2001 being in place.


84

31. Transactions and balances with parties under special relations

(i) Company Administration

S.A.I. Muntenia Invest S.A. – Administrator of the Company

The Company operates under an administration contract signed with the company Societatea de

Administrare a Investiţiilor Muntenia Invest S.A. The majority shareholder of Societatea de

Administrare a Investiţiilor Muntenia Invest S.A. is SIF Banat-Crisana holding 99.96% of the share

capital on 31 December 2016 (31 December 2015: 99.96%). The Board of Directors of SIF Banat

Crisana S.A. may change the Board of Directors of SAI Muntenia Invest S.A., Company’s

administrator.

Transactions performed between the Company and its Administrator were the following:

In LEI 31 December

2016

31 December

2015

Receivables and liabilities

Liabilities for management fee (1,908,250) (1,450,000)

Trade receivables - 8,068

In LEI 2016 2015

Revenues and expenses

Management fees (17,858,250) (17,400,000)

Rent income 66,000 5,500

(ii) Key management personnel

31 December 2016

• Board members of S.A.I. Muntenia Invest S.A.: Florica Trandafir, Daniel-Silviu Stoicescu and

Nicușor Marian Buică;

• Members of the executive management of S.A.I. Muntenia Invest S.A: Gabriela Grigore -

General Director, Florica Trandafir – Corporate Administration Director, Mircea Constantin -

Strategy Director;

• Members of the Shareholders Representatives Council

The group did not receive and did not give guarantees in favor of any party having special relations

with.


85

31. Transactions and balances with parties under special relations (continued)

(ii) Key management personnel (continued)

Transactions with key management personnel

In LEI 31 December

2016

31 December

2015

Other transactions

Remuneration of Shareholders Representatives Council

members

1.308.160 1.226.842

Remmuneration of BoD members and directors 9.207.478 7.005.195

As of 31 December 2016 the Group registers an average of 1,414 employees (31 December 2015:

1,464).

(iii) Group subsidiaries

The percentage of voting rights resulting from the calculation of direct and indirect holdings:

Denomination of the company Percentage of

voting rights

as of 31

December 2016

Percentage of

voting rights

as of 31

December 2015

Avicola Bucureşti S.A. 99.40% 99.40%

Bucur S.A. 67.98% 67.98%

Casa de Bucovina - Club de Munte S.A. 68.94% 68.94%

CI-CO S.A. 97.34% 97.34%

Firos S.A. 99.69% 99.69%

FRGC IFN S.A. 53.60% 53.60%

Gecsatherm 50.00% 50.00%

Mindo S.A. 98.02% 98.02%Muntenia Medical Competences SA 98.94% 98.94%

Semrom Muntenia S.A. 90.68% 90.68%

Semrom Oltenia S.A. 88.50% 88.50%

Unisem S.A. 76.97% 76.97%

Voluthema Property Developer S.A. 99.81% 99.81%

Biofarm S.A. 50.98% 50.98%


86

31. Transactions and balances with parties under special relations (continued)

(iii) Group subsidiaries

On 31 December 2014, the subsidiary Muntenia Medical Competences S.A. recorded a net asset

value, determined as the difference between total assets and its total debts (according to financial

information prepared in accordance with the IFRS principles of measurement and presentation) less

than half of the subscribed capital, which led to her entry to the general procedure of insolvency. On

6 January 2016 the Reorganization Plan of Muntenia Medical Competences S.A. was approved by

the SGA, and on 18 January 2016 by the Assembly of Creditors. Although no creditor has submitted

complaints until the deadline for lodging appeals, however, on 24 February 2016 the court took note

of the meeting notes made by the creditor Mona SRL requesting invalidation of the reorganization

plan. Although a new hearing to defense was requested, this request was rejected. Thus, on 9 March

2016 Arges Special Court issued its judgment no. 308 that denied the Reorganization Plan and

ordered bankruptcy. Following this ruling, Muntenia Medical Competences S.A., SIF Muntenia

S.A. and SMDA Insolvency SPRL asked the Court of Appeal Pitesti suspension of fund settlement

set and confirm the reorganization plan. On 24 March 2016 Pitesti Court of Appeal ordered the

provisional suspension of the sentence no.308 / 9 March 2016 to resolve the suspension request

made in the appeal. On 14 September 2016, the Court of Appeal communicated the final civil

judgment No. 487/2016 confirming the reorganization plan.

For the subsidiary Semrom Oltenia S.A. the maturity of financing facilities, reducing the value of

own funds as a result of financial performance recorded, lead to the need for an additional

contribution of own funds to ensure subsidiary’s business continuity.

The ability of these subsidiaries to continue work still depend on the support of shareholders and /

or financing.

(iv) Associates of the Group

At 31 December 2016 and 31 December 2015 the Group did not hold participations in affiliates.

(v) Transactions with affiliates of subsidiaries

In LEI 31 December

2016

31 December

2015

Receivables and liabilities

Trade liabilities for services rendered and goods sold - 1.765.488

Trade receivables - 3.140.606

Other receivables 800.825 735.761

In LEI2016 2015

Revenues and expenses

Purchase of goods and services 6.666.778 9.592.758

Sale of goods and services 18.248.104 17.946.554


87

32. Fund units

Financial assets available for sale 31 December 2016 31 December 2015

FÎI Certinvest Properties RO 722,007 2,509,806

FÎI STK Emergent 1,416,142 1,693,504

FÎI BT Invest 1 7,562,519 7,108,417

FDI Transilvania 4,167,347 4,049,746

FDI Napoca 5,647,736 5,262,238

FÎI Multicapital Invest 9,072,484 4,817,115

FÎI Fondul de acţiuni privat Transilvania 852,107 867,668

FÎI Omnihedge 262,183 262,417

FÎI BET-FI Index Invest 3,891,293 5,139,026

FÎI Omnitrend 10,456,086 -

FDI Raiffeisen Confort EURO - 10,829,921

FDI STK Europe 1,064,585 885,985

FDI Certinvest Obligaţiuni - 459,867

FDI Certinvest Prudent 339,439 352,521

FDI Certinvest Dinamic 946,955 932,130

FDI BRD Obligaţiuni - 1,619,667

FDI Star Next 1,047,205 635,204

FDI Star Focus 879,416 701,726

FDI Raiffeisen Confort - 811,129

FDI Prosper Invest 1,092,039 1,015,193

FÎI Active Plus 32,407,650 -

FÎI Star Value 11,254,550 -

FDI Active Dinamic 17,537,418 -

FDI Erste Balanced 1,844,976 1,610,681

FDI Erste Equity 1,129,242 1,411,270

FDI NN (L) International Romanian Bond - 828,078

Total 113,593,380 53,803,308

Impairment losses (Nota 17.b) (1,028,920) (1,028,920)

Financial assets available for sale (Note 17.b) 112,564,460 52,774,388

Fund units as of 31 December 2016 and 31 December 2015 are:


88

32. Fund units (continued)

Financial assets at fair value through profit or loss 31 December 2016 31 December 2015

FDI Active Dinamic - 19,949,320

FDI Star Next - 376,714

FDI Star Focus - 174,241

FÎI STK Emergent - 643,264

FÎI Multicapital Invest - 4,468,142

FÎI Active Plus - 33,085,004

FÎI Omnitrend - 18,273,227

FÎI Star Value - 11,208,392

FDI Bond Flexible BCR EURO 1,844,741 1,598,628

FDI Raiffeisen RON FLEXI 1,028,189 484,732

FDI Raiffeisen EURO PLUS 262,250 473,202

FDI Money Market BCR LEI 1,132,259 -

Total 4,267,439 90,734,865

Fair value adjustments (Note 17.a) - (9,647,667)

Financial assets at fair value through profit or loss

(Note 17.a)

4,267,439 81,087,198


89


The structure of financial instruments held in portfolio and the net asset value certified by the custodian bank at the latest date for which information is public - 31

December 2016, for the investment funds held by the Company are presented below.

Fund denomination Administrator

(SAI)

Depositary Investments

Deposits Available Securities Bonds UCITS/NON

UCITS

participation

titles

Dividends/Other

rights

Other

instruments

NAV per share

31.12.2016

FII Certinvest

Properties RO

SAI Certinvest BRD-GSG 0,00% 0,11% 3,95% 90,79% 5,16% 0,00% 0,00% 246.462,7900

lei

FII BT Invest 1 BT Asset

Management

SAI

BRD-GSG 17,28% 2,23% 77,84% 0,00% 0,00% 2,64% 0,01% 14.531,9200 lei

FII Multicapital Invest SAI STAR

Asset

Management

BRD-GSG 15,53% 0,00% 84,27% 0,00% 0,00% 0,19% 0,01% 2.091,8800 lei

FII Omnihedge SAI SIRA BCR 99,64% 0,04% 0,00% 0,00% 0,33% 0,00% 0,00% 5.627,4463 lei

FII Omnitrend SAI SIRA BCR 2,45% 0,00% 90,49% 6,87% 0,19% 0,00% 0,01% 6.752,3120 lei

FII Star Value SAI STAR

Asset

Management

BCR 25,73% 0,00% 73,24% 0,28% 0,12% 0,49% 0,14% 743,6600 lei

FII Active Plus Swiss Capital

Asset

Management

Unicredit 2,15% 0,00% 96,67% 0,00% 0,00% 1,19% 0,00% 7.985,7800 lei

FII BET-FI Index

Invest

SAI Broker BRD-GSG 0,00% 3,14% 87,74% 0,00% 9,12% 0,00% 0,00% 469,0000 lei

FII STK Emergent STK Financial

SAl

BRD-GSG 53,47% 6,63% 36,43% 0,00% 3,47% 0,00% 0,00% 62,0000 lei


90


Fund denomination Administrator

(SAI)

Depositary Investments

Deposits Available Securities Bonds UCITS/NON

UCITS

participation

titles

Dividends/Other

rights

Other

instruments

NAV per share

31.12.2016

FDI Transilvania SAI

Globinvest

Bancpost 4,66% 2,13% 55,32% 27,28% 8,72% 0,00% 1,90% 41,2266 lei

FDI Napoca SAI

Globinvest

Bancpost 4,47% 3,02% 80,49% 0,00% 9,49% 0,00% 2,53% 0,4527 lei

FDI Certinvest Prudent SAI Certinvest BRD-GSG 28,05% 0,05% 29,26% 32,84% 9,28% 0,38% 0,16% 9,8600 lei

FDI Certinvest

Dinamic

SAI Certinvest BCR 13,43% 1,94% 53,86% 16,65% 9,43% 0,50% 4,42% 5,9682 lei

FDI Star Next SAI STAR

Asset

Management

BRD-GSG 33,93% 0,01% 57,09% 4,88% 2,35% 1,74% 0,01% 5,4960 lei

FDI Star Focus SAI STAR

Asset

Management

BRD-GSG 56,61% 0,01% 24,93% 15,30% 2,95% 0,20% 0,06% 5,7617 lei

FDI Active Dinamic Swiss Capital

Asset

Management

Uncredit 3,77% 0,01% 79,56% 0,00% 0,00% 16,61% 0,05% 5,9682 lei

FDI Prosper Invest SAI Broker BRD-GSG 14,86% 2,21% 64,30% 9,48% 9,12% 0,03% 0,00% 10,9111 lei

FDI TehnoGlobinvest SAI

Globinvest

Bancpost 13,24% 4,22% 82,07% 0,00% 0,00% 0,47% 0,00% 1.133,4378 lei

FDI STK Europe STK Financial

SAl

BRD-GSG 95,69% 4,54% 0,00% 0,00% 0,00% 0,00% 0,00% 5,2335 lei


91

33. Subsequent events

On 3 March 2017, Mr. Nicuşor Marian Buică was authorized by the FSA through the Authorisation

No. 45, as appointed during the SGOM of SAI Muntenia Invest S.A. from the 27 December 2016 on

the position of a member of the Board of Directors of SAI Muntenia Invest S.A. for a period of 4

years from the date of appointment. At the same time the SGOM SAI Muntenia Invest S.A. decided

to revoke the mandate of Mr. Sorin Florian Boldi as a member of the Board of Directors of SAI

Muntenia Invest S.A..

Bucur S.A.: On 29 May 2017, the resignation from the Board of Directors of Mrs. Uta Vasilica was

registered at the headquarters of the company. On 8 June 2017, the Board of Directors co-authored

Mr. Sergiu Mihailov as provisional administrator, according to the legal provisions in force.

CI-CO SA: In May 2017, the resignations of the members of the board of directors - Cătălin

Corneliu Scripcariu, Pavel Avrămoiu and Daniel Silviu Stoicescu were recorded at the company's

headquarters. During the SGOM of 19 June 2017, Sergiu Mihailov and Constantin Stefan were

appointed as members of the board of CI-CO. The newly elected Board of Directors decided on 28

June 2017 the appointment of Mr. Ioneaţă Ion-Sorin as provisional administrator and the

appointment to the position of General Manager as of 30 June 2017. The SGM of the company was

convened for 8/9 August 2017 in order to appoint a new member of the board of directors.

Fondul Român de Garantare a Creditelor IFN: On 3 January 2017, Mr. Vasile Jianu was appointed

as General Manager with a mandate until 3 January 2018.

Mindo S.A. Dorohoi: On 22 March 2017, the resignation from the position of member of the BoD

of Ms. Alexe Valentina was registered. Ms. Iancu Liliana was appointed as provisional member -

then permanently according to the SGM decision of the company.

Muntenia Medical Competences S.A.: On 12 January 2017, the General Meeting of the

Shareholders approved the dismissal of the Special Administrator and the appointment as Special

Administrator of Mr. Palea Ovidiu Nicolae, doctor by proffession.

On 28 June 2017 Voluthema organized an open auction for the sale of the land located in

Jandarmeriei. The auction ended with the sale of the land at the price of 650 eur / sqm. At the date

of this report, the purchase sale agreement was not finalized and therefore the land value was not

collected.

ADMINISTRATOR, PREPARED BY,




A000158/26.01.2000


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